The number of states that impose sales tax on groceries has been shrinking over the years, and could drop even further in the coming months once lawmakers hear complaints about the high prices of eggs and other household staples.
Arkansas Gov. Sarah Huckabee Sanders revealed details of her proposal on Tuesday to eradicate the remaining 1/8 of the cent sales tax, which places state charges on groceries. Lawmakers in Tennessee, Mississippi and Alabama are also calling for tax cuts on grocery.
The effort comes as states face budget uncertainty as Medicaid and other federal programs are being seen by Republicans in Washington. However, tax cuts supporters have cited headlines about rising egg prices as a reason they are currently needed.
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“We’ve taken out Arkansas’ most regressive taxes and dedicated our help to those who need it the most,” Republican Sanders discussed the proposal at a press conference.
The number of states taxing food has been declining in recent years, with Oklahoma and Kansas excluded state collection laws last year. The law to abolish Virginia’s tax on food came into effect in 2023. The Illinois law to abolish the 1% grocery tax is expected to come into effect next year.
State sales taxes are imposed on groceries in nine states: Arkansas, Hawaii, Idaho, Illinois, Mississippi, Missouri, South Dakota, Tennessee and Utah. However, Hawaii and Idaho are offering tax credits to residents to offset their taxes.
In Tennessee, Republican legislative leaders have proposed to eliminate the state’s 4% sales tax on groceries. The law comes after a failed similar proposal, as a handful of Democrats in the state claim that Tennessee pays 6.75% sales tax on essentials such as bread and milk in areas with local sales tax.
Our egg price is a record high of $4.95 and could continue climbing
But it’s unclear how much fares will be paid in Republican-controlled Tennessee, even in GOP-backed bills. The state’s revenue is expected to be tighter than this year, with Gov. Bill Lee not including cuts in his proposed budget, nor did it include grocery sales tax leave, which is usually included in his legislative priorities.
House majority leader William Lamberth, one of the sponsors of the abolition, narrowed down the bill and said it could only be applied to essentials that would hit the hardest person’s pocketbook rather than junk food.
“Milk, eggs, bread, that’s a great place to start,” Lambers said.
Alabama Democrats are planning to implement tax cuts, which includes eliminating the state’s remaining 3% grocery tax. In 2023, lawmakers approved a gradual removal from 4% to 2%.
Democrats said families need bailouts.
“If you’re serious about helping workers move on, the best and most influential way to do that is to cut taxes and feel at ease when paying rent or going to the grocery store,” Democrat Adolin Clark said in a news release.
Lawmakers have been debating tax removal for decades, but the proposal never came to fruition due to losses caused by education funding.
A tax cut package that passes through the Mississippi Legislature would cut the state’s 7% sales tax to groceries.
Other groceries tax cut proposals are undermining. South Dakota voters rejected a vote last year to abolish the state’s grocery tax.
Why are grocery prices still high? The same goes for the US government
Arkansas rarely eliminated the grocery tax under Sanders’ predecessor, the government of Mike Beebee and Republican Gov. Asa Hutchinson. All that remains is a 1/8th of the sales tax, which will be applied under constitutional amendments approved by the outdoor program voters.
Arkansas costs nearly $11 million a year, Sanders said the program could absorb it.
Reducing or removing grocery taxes can reduce state tax regression, but it is a time when states face the potential for additional costs due to federal budget cuts.
Instead, states can see other cuts, such as earned income tax credits and child care tax credits, said Aidan Davis, state policy director at the Institute for Taxation and Economic Policy.
“If the goal is to help people achieve their goals, I think it makes a lot of sense to do it in a more target-rich way,” Davis said.
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