Why Take the Easy Way Out
by Senator Brent Hill
Chairman of the Senate Local Government and Taxation Committee

Idaho’s robust economy is stirring up talk among state legislators of reducing the sales tax burden imposed on our citizens. Contriving ways to make that happen is limited only by political ingenuity. Every lawmaker from the governor to the freshman legislator has devised a plan to reduce the sales tax, but most proposals fall within three categories:

Each proposal has advantages and disadvantages and may have to be phased in over more than one year.

Exempt Food
Exempting groceries from sales tax creates administrative nightmares, starting with the determination of what would qualify. For instance, a chicken dinner in a restaurant would be subject to sales tax, but buying a frozen chicken from the grocery store would be exempt. What about the cooked chicken purchased at the grocery deli? Should candy be exempt? What about soda pop—does it matter if it is purchased in a can or a glass? Our relatively simple sales tax law would turn into reams of regulations rivaling the Internal Revenue Code! Exempting food items would also burden the mom-and-pop convenience stores scattered throughout rural Idaho. Most of them do not have machines to read barcodes and separate nontaxable items from taxable sales. To require them to manually track each sale is unconscionable.

Idaho’s current sales tax is a flat tax and many prefer “progressive” taxes that extract higher proportions from those who make more. Exempting groceries from sales tax is designed to help lower-income people, but I have been a tax accountant for over thirty years and the worst tax laws I have encountered are those that try to remedy welfare problems. We have a Department of Health and Welfare to tackle Idaho’s many social issues. Sound tax policy requires us to establish a system that collects revenues in an equitable, stable and efficient manner. It is inappropriate to set tax policy for the purpose of solving social problems.

Increase the Grocery Credit
Idaho taxpayers are granted a $20 refundable tax credit for each member of the household. The credit represents a return of a portion of the sales tax paid during the year on groceries. It is easy to calculate and simple to administer, but under current law, low-income families not required to file income tax returns are not entitled to the credit. The credit could be raised significantly (say to $100 per household member) and made available to all families, even when income tax returns are not filed.

Lower the Sales Tax
It isn’t as fun to tout as the other inventive schemes, but there is a reasonable, equitable, and straightforward way to reduce sales tax: cut it back to five cents again! As a flat tax, it provides relief to all taxpayers on all purchases and the cost to the state is not much more than either of the other two plans. If we can retain the property tax relief provided by the Special Legislative Session last August while maintaining support for public education and other state programs and, at the same time, reduce our sales tax back to five cents, everybody wins! But, I know—it’s too easy, right?