States Press for Tax Fairness By Moving Against Regressive Food Taxes

Tax cuts have dominated fiscal committee discussions in state capitols but tax fairness should be a central part of the tax debate. Regressive taxes place a higher burden on poor individuals as a percentage of their income and therefore unfairly penalize those least able to sustain themselves and their families. Taxes on food are regressive.

As a share of income, food costs are typically four to five times as high for poorer families as for upper-income families. Therefore sales taxes on food for home consumption falls most heavily on families at the bottom of the income ladder.

Many states are using budget surpluses to reduce the food tax since it is so regressive. Within the last three years Georgia, Louisiana, North Carolina and Missouri have reduced their food tax. In the 1998-99 legislative session Virginia passed a bill (HB 1601) to reduce the state food tax by 2 percent over four years. Of the 45 states that levy general sales taxes, 20 apply their sales taxes to food purchased for home consumption.

Currently, five states tax groceries at lower rates than other goods and six states tax groceries fully but offer credits to low-income consumers that offset taxes paid on food. However, nine states continue to apply their sales tax fully to food purchased for home consumption without providing any relief for low-income families.

The purchase of food for home consumption is a shrinking sector of the economy and sales tax revenue from this tax is declining. States would be better off basing sales tax on growing sectors of consumption and economic activity such as purchase of services, according to a report by the Center on Budget and Policy Priorities (CBPP).

For more information on the food tax, visit the CBPP website.