How Idaho's Sales Tax Saddles Low-Income Households 

Last Tuesday, 72 percent of Idaho voters gave their stamp of approval on Governor Jim Risch's property tax relief/sales tax increase plan passed by legislators in the August 25 special session. The voter endorsement won't change much--property owners are already slated to see a decrease in their property taxes this December, and the state sales tax increased by 20 percent on October 1.

But for many Idahoans, Risch's tax plan won't mean lower taxes. The Idaho Center on Budget and Tax Policy says that 95 percent of Idahoans pay more in taxes now than they did before the bill. For low-income families, the tax shift may mean fewer groceries this winter, maybe one less pair of shoes in a family, or one health-care bill that won't get paid. Renters and low-income households are the short-term losers in this plan--they'll pay more in sales tax with little or no other form of tax breaks.

State officials--including Risch--have recognized the unfair tax balance and say they're ready to find a remedy. Risch told lawmakers gathered for a conference in Post Falls this week that he was ready to take a stab at removing the sales tax on food over a six-year period. His proposal is to remove the tax a penny per year, to spread out the loss of revenue.

In the meantime, Idaho renters are spending 1 cent more on the dollar for tomatoes and cereal, and shoes and school supplies. Legislators may finally be getting serious about nixing the grocery tax, but to struggling low-income families, it's no new concept. When money runs low at the end of the month, they say, 6 percent isn't just nickels and dimes--it might be the difference between going hungry and having food to put on the table.

A few times a month, Kathy McNary crosses the border to buy food and other necessities for her family of five. The 40-year-old mother lives in Caldwell, but says traveling to Ontario, Oregon, for groceries is a no-brainer. "I save a lot," she says. "If I spend $50 at one store, that means I save $3 in taxes. That adds up pretty quickly."

McNary gets a monthly disability stipend because she has fibromyalgia, a condition that causes severe joint and bone pain and deterioration. McNary hopes for a time that she'll be able to work again, but until that day, she and her family live off of her and her children's monthly disability checks. Money is tight. Their rent alone eats up $700 of their monthly income, leaving barely half that to pay for bills, car payments, groceries and other essentials.

When the cabinets were empty one day three years ago, McNary was stuck between a rock and a hard place.

"I'm one of these people who don't like to ask for help," she says. Nonetheless, she went to a food pantry operated by the Idaho Community Action Network, and was able to get enough food to last through the month. McNary has received food assistance from the ICAN pantry several times since then. Even in those months that her family has received food assistance in the past, she says it's been difficult to pay the bills.

The McNary family is not unlike many families in the Treasure Valley who have had to enlist the help of agencies to get through the month.

"We needed food, but we were having a hard time paying for food with rent, utilities, and other bills, she said. "Whatever we had left went for food."

McNary and her family keep a tight rein on their spending to make sure that they can make it through the month. They clip coupons and look for deals wherever they can find them.

"We watch the sales really, really close," she says. At the grocery store, McNary says her purchases are driven by price. "We look for the cheapest we can find and we go with that," she says. "Say, like a can of chicken noodle soup--we buy the generic brand because we can't afford the other kinds."

What would she do if she had a 20 or so extra dollars each month? McNary doesn't hesitate: "I would use it to buy more food for the family," she says.

A few more dollars a month may not be life or death for her family--but it is the difference between buying groceries in Oregon vs. buying groceries in Idaho. The Idaho difference is state sales tax--and some legislators are talking about getting rid of the tax on groceries to make it easier for households like the McNary's.

A 20 percent tax increase

"It was the low point of recent legislative history," says Senator David Langhorst, a Boise Democrat, about Risch's bill. Langhorst and other Democrats wanted to present a bill that would give property tax relief to homeowners without raising the sales tax.

A majority of Idaho residents will experience a net tax increase because of the bill, according to the Idaho Center on Budget and Tax Policy. While the numbers have been debated, Langhorst says it's certain that the bill unjustly shifts the tax burden onto low-income people. "Here's one thing I can tell you for dang sure: 20 percent of families in Idaho--the people who don't own their own homes and are probably not the biggest breadwinners in the state--are paying more," he says.

An extra penny on the dollar doesn't sound like much, but the sales tax increase adds up in nickels and dimes for struggling families, says Daylinn Kuster, multi-programs manager for El Ada, a Treasure Valley agency that provides various forms of aid to low-income people in the valley. "Anytime a low-income household has to pay more money out of their pockets it increases the stress on their budget," she says.

She notes that low-income families don't necessarily peg the increased sales tax as the culprit for a higher grocery bill, however. "Whether they identify the sales tax specifically or whether they simply recognize that the cost of groceries is going up--they still know that it's hard to pay the bill when they get to the check stand," says Kuster.

Karen McWilliams, 61, a coordinator for ICAN and her sister rent an apartment in Boise, and both receive federal disability stipends. McWiliams regulates her spending through careful budgeting, she says. And like most of the families that McWilliams works with at ICAN, her budget is stretched when costs rise--even if the cost is simply a 20 percent increase in sales tax.

"It's hard when you have a set budget for something," says McWilliams. "If you raise that cost, but you don't have any more money coming in, you face not getting the things you need."

McWilliams notes some families with school-age children are faced with tough choices when they can't afford certain necessities, like school supplies. "Do they go without?" she asks. "Then they can't go to school. Even that one penny affects them. It's amazing."

McNary says purchasing yearly school supplies is especially difficult. "You have to budget for them, and usually you have to take the money out of your food bill," she says. "School always starts before the end of the month, so you don't necessarily have the money by then." McNary says that she and her two high-school-age kids watch the sales closely and choose their supplies carefully. If they can't find notebooks or binders within their price range before the school year begins then they may wait until the beginning of the next month.

McWilliams thinks the increased sales tax places an unfair burden on low-income households in the state. "It is going to affect them deeply because they will have to pay more to buy things, clothing, and food-- it makes it very, very hard for low-income people to go out and buy the things they need," she says.

When groceries break the budget

Idaho has been identified as the eighth-hungriest state in the nation, according to recent research by the U.S. Department of Agriculture. State government doesn't make it any easier for families with small monthly incomes, says Roger Simon Idaho Food Bank's executive director. He says he'd like to see the state provide more assistance to low-income families.

The Idaho Food Banks knows first-hand how difficult it is for some families to afford their grocery bill. The statewide agency supplies food to over 200 affiliated food pantries in the state that provide emergency food assistance to people in need. Simon says that the majority of people who receive food from the pantries work full or part-time. "But there is a significant gap between what people earn and what people need to feed their family," he says.

Most of these struggling low-income families have to prioritize paying their fixed monthly bills before they buy groceries. "The rent is the rent; the utilities bill has to be paid or else the power is shut off; the heat has to be paid or else it's turned off," says Simon. "So what happens is that these families often skimp corners on the food bill."

That's often the point when people turn to food pantries, says Daylinn Kuster of El Ada. The food bank in Garden City is one of about two dozen that serve the Treasure Valley.

"You can come to El Ada once every 60 days for food," Kuster says. "Throughout the month [working parents] might visit different food pantries around the valley two to three times a week so that they can feed their families."

Kuster says most of the families that come to the pantries are surviving from paycheck to paycheck. It's a stressful situation, says McNary, and one that leaves little spending money for family fun.

"We don't splurge on hardly anything because our bills are just really high right now," McNary says. "It's just too hard to try to do something special. And when we try to budget it in something else always comes up so that we don't actually have the money after all."

It's not any one thing that makes it difficult for the McNarys or other low-income families to make it through the month. A number of costs, from rent, to groceries to taxes stretch already thin budgets.

"You've got to pay your big bills," McNary says. "And then the little things add up, too. Taking the tax off of groceries would just make it a little easier."

McNary's hope for her future is now shared by Idaho politicians from both parties.

An axe on the food tax?

During the campaign season, politicians used the grocery sales tax elimination card throughout the state. Democrats and Republicans may have different reasons for promoting the tax elimination--some Republicans want less taxation in general, while Democrats point to the shifted burden on low-income people due to Risch's tax plan. But at least a few returning leaders have promised to tackle the issue in the upcoming session.

State Senator Shawn Keough, a Republican from District 1 in north Idaho, campaigned on her plan to sponsor a bill in the upcoming session to provide some form of grocery sales tax relief.

"For me, it is a moral issue," said Keough. "I don't think we should be taxed on the food that sustains us."

Idaho is one of only 11 states in the nation that applies the full state sales tax amount on groceries. Of those, Idaho is one of six states that give residents a grocery tax credit intended to offset some of the tax costs on a family's grocery bill. Residents receive the grocery credit after filing their state income tax form, although not everyone knows about it. Last year, 129,464 people received the credit. The amount ranges from $20-$35 per person, depending on each family member's age.

Keough, who was re-elected Nov. 7, says she would prefer to have the grocery sales tax eliminated completely in the next legislature. But if that's not feasible, she will work on raising the tax credit, and pledged to sponsor a bill raising it to at least $100 per person. 

McNary says she'd like to see elected officials eliminate the grocery tax altogether, but just raising the grocery credit would help her family a lot. She doesn't qualify to receive the credit right now she says, but her husband might when it comes time to file taxes. "Knocking it up to at least $25 more per person would be good," she says.

Keough thinks it might be difficult to pass a grocery tax elimination bill this session because of the lost revenue it would create.

Governor Jim Risch agrees. During his campaign for lieutenant governor, Risch also declared that he would work towards eliminating the sales tax on food during the next session.

"I really wanted that to be part of the package when we did the property tax reform," Risch said in an interview. "But when you go out shopping for votes, you do what's possible."

Now he's gotten specific about what he thinks is possible, and is pushing the Legislature to adopt his ideas.

To avoid the estimated $181 million that a full repeal plus grocery tax credit revision would cost, Risch told lawmakers he wants to try a six-year graduated repeal of the sales tax on groceries. Each year, the sales tax on groceries would drop by one penny under his proposal. Risch said the net cost of his idea would be $30 million annually.

"In the end, Idahoans just don't like paying tax on groceries," Risch said in his speech in Post Falls, a draft of which was provided to BW. "So far, the income tax credit has not satisfied their desire to get the tax off groceries."

Simon says he would like to see the state take the tax break a step further and remove taxes on other basic necessities like clothing.

"You have to be able to dress your children," Simon says. Certain states have lifted the sales tax on clothing as well as on groceries. Other states lifted sales taxes on clothing and school supplies for a short while preceding the start of the school year.

But Hoaglun doubts that Risch would support such a bill, since some purchases like shoes or clothing might be luxury buys rather than family necessities. "People have choices about how much they want to spend. They can decide whether they want to spend $100 for a new pair of Nike sneakers, or $20 for a different brand," Hoaglun says.

But ultimately, the type of bill that Risch, Keough, or others will present will depend on the political momentum they can build now.

"Right now it boils down to what he can get legislators to agree upon," Hoaglun says. "If you can't get one or both houses to agree, then it doesn't matter if you have a good idea."

Either raising the grocery credit or eliminating the grocery tax will have an affect on the state tax revenue. The Idaho State Tax Commission estimates that removing the grocery sales tax on food alone could cost the state $155-160 million annually, as opposed to the $181 million figure cited by Risch. Last year doling out the state grocery credit cost Idaho about $25.3 million. Raising the credit to $100 per person could cost the state over $125 million annually.

The numbers make some Republican lawmakers nervous. Senator Tim Corder, a Mountain Home Repulican, serves on the Senate Local Government and Taxation Committee. He would prefer to give the tax break to people who need it the most and not, say, to tourists or temporary visitors.

"As Idaho moves more and more to becoming a culture that becomes dependent on tourists, if we just eliminate the tax on food, then approximately $12 million would go away because of tourist spending," Corder says.

"Some people would call that a gap in revenue," says Langhorst. "I call it tax relief."

Langhorst finds it a little ironic that some Republicans are suddenly so interested in an idea that Democrats have pushed for years. But that, some observers say, is the life of the minority party.

"If that's where [Republicans] want to go then let's go there," Langhorst says. "You make progress wherever you can."

With no concrete bills drafted and the start of the legislative session still a month and a half away, it's too early to tell how legislators will move on this issue. But given all the hubbub surrounding the special session and the promises made during the campaign season, it seems like a likely issue to be addressed.

Karen McWilliams says she's glad that the legislators are at least talking about helping low-income people like her and her sister. She and other ICAN volunteers met last week to discuss the possibility of a grocery tax elimination bill and how they might help it pass. She says that she and other ICAN volunteers would be likely to testify in support of such a bill when it reaches the floor.

Eliminating the tax on groceries will be just one way to help low-income families succeed, McWilliams says. She was glad to see property taxes go down.

"I'm renting an apartment and the rent goes up every time the property taxes go up," she says.

But ultimately she would like to see state leaders consider more ways to help struggling Idaho families on a regular basis.

"People in the legislature and city officials need to start thinking more about the low-income and poor people in Idaho," McWilliams says. "Give us a chance and we'll show what we can do. Give us a hand, and we can help ourselves."

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