Business

As food prices soar, some states consider cutting taxes on groceries


A person buys groceries at Lincoln Market on March 10, 2022 in the Prospect Lefferts Garden neighborhood of Brooklyn borough in New York City.

Michael M. Santiago | beautiful pictures

New government inflation data shows prices are rising in one key sector – food.

Some states are now looking to help ease that burden on consumers by limiting taxes on groceries.

But such moves may not benefit the most people the policies are meant to help – low-income taxpayers, according to a new report by the Tax Foundation.

Furthermore, the policies would provide only modest tax savings for the middle class, the report found.

More from Personal Finance:
Near-risk-free Bond I could soon pay 9.62% interest
Smart money moves to make money amid high inflation, rising interest rates
How to save money at the gas pump amid inflation

A better solution might be to offer a $75 credit that, for example, could help the poorest households save 31% of their tax liability, independent tax policy nonprofit said.

“There are better ways to help low- and middle-income households, including the grocery tax credit,” said Jared Walczak, vice president of state projects at the Tax Foundation. rather than duty free.

Currently, 13 states impose taxes on groceries.

Seven states tax groceries at the usual sales tax rate, including Alabama, Mississippi, and South Dakota. Four other states – Hawaii, Idaho, Kansas and Oklahoma – also offer credits or rebates to low-income households.

13 states include groceries in sales tax

Status Normal rate Grocery rate
Alabama 4% 4%
Arkansas 6.5% 0.125%
Hawaii 4% 4%
Idaho 6% 6%
Illinois 6.25% first%
Kansas 6.5% 6.5%
Mississippi 7% 7%
Missouri 4.225% 1.225%
Oklahoma 4.5% 4.5%
South Dakota 4.5% 4.5%
Tennessee 7% 4%
Utah 4.85% 1.75%
Virginia 5.3% 2.5%
Source: Tax organization

Six other states – Arkansas, Illinois, Missouri, Tennessee, Utah and Virginia – tax groceries at a reduced rate.

This year, most states have proposed legislation to reduce or eliminate those taxes, according to Walczak. “The high concentration this year is related to high grocery prices,” he said.

Remarkable, many states have considered tax cuts they imposed on gas in the face of record-high inflation. Several states including Connecticut, Georgia and Maryland have successfully implemented temporary gas tax suspensions.

Like gasoline, the cost of food has also skyrocketed.

Recent consumer price index data shows that food prices have increased by 8.8% over the past 12 months, biggest increase since 1981.

But limiting the merchandise tax could backfire for the low-income shoppers the policy is meant to help.

Such a move is designed to be progressive, so that higher earners pay higher sales tax rates. But many low-income families rely on benefits like the Supplemental Nutritional Assistance Program, or SNAP, to pay for food, and that can reduce their taxable food consumption, and thus limit the amount they can save from the sales tax exemption. Also, people in this group don’t necessarily spend more on groceries than on other necessities.

As a result, policies that reduce or eliminate the grocery tax actually tend to benefit middle-income households the most, according to the Tax Foundation.

The better solution would be to expand the sales tax base to include a tax on groceries and consumer services, which is used more frequently by high-income consumers, the nonprofit reports. .

Research shows that, if combined with a modest grocery tax credit, say $75 per person, that could save the poorest households 31% on their sales tax liability. them, research shows.

“It’s very hard to target low-income households,” Walczak said of the proposed grocery tax cut. “It’s also worse to share the same amount of relief, for a general. [sales tax] rate reduction or credits. “



Source link

news7f

News7F: Update the world's latest breaking news online of the day, breaking news, politics, society today, international mainstream news .Updated news 24/7: Entertainment, Sports...at the World everyday world. Hot news, images, video clips that are updated quickly and reliably

Related Articles

Leave a Reply

Your email address will not be published.

Back to top button