Purchasing food-related groceries in Idaho could soon become more affordable under a new bill introduced today. House Bill 61 (Food tax credits and refunds), proposed by Rep. Jason Monks, would increase the Gem State’s grocery tax credit from $120 per Idaho resident to $155. One of our recommendations this year for lawmakers is to increase the state’s grocery tax credit and index it for inflation.
The current grocery tax credit of $120 per Idaho resident would equal $480 for a family of four. The new proposed credit of $155 would increase those savings to $620 for a family of four, a 29% increase. According to Rep. Jason Monks, that means after claiming the increased tax credit, a family of four would be able to purchase approximately $10,000 worth of food-related groceries tax-free during the year.
According to the statement of purpose for HB 61: “Currently the grocery tax credit is $120.00 per person or $140.00 for individuals 65 and older. This legislation will increase the grocery tax credit for all individuals to $155.00 starting in the fiscal year of 2026. Additionally, this legislation will give Idaho income tax filers the option to take the $155 tax credit per person, or to receive a full refund of all taxes paid on groceries up to $250.00 per person by itemizing their grocery expenses on their annual income tax returns. This legislation will provide approximately $50 million in tax relief to Idahoans. This legislation will also reduce revenue to the General fund by approximately $50 million. Of the $50 million, $47 million will come from increasing the credit and approximately $3 million from individuals who claim the full refund by itemizing.”
The alternative option of itemizing receipts proposed by HB 61 illustrates the complexity that would occur if the grocery tax credit was instead repealed (see Section 1 (9)(a) of the bill). This is the challenge other states have faced when trying to define what qualifies as food for taxation purposes and how to define what candy or soda is.
Rather than increase the grocery tax credit, some have instead called for a full repeal of the sales tax on groceries. Instead of repealing or exempting the tax for all, grocery tax credits or rebates offer low-income households better savings.
Research from the Tax Foundation concludes: “Grocery exemptions are a middle-income, not a low-income, benefit – and middle earners can be more efficiently made whole through grocery tax credits. Higher earning households purchase not only more, but higher qualities of, groceries. Low-income households, in fact, are more likely to purchase taxable substitutes to what states classify as groceries, a category that traditionally only covers unprepared foods. The result is that a household in the fifth decile spends almost 70 percent more than a household in the first decile, and a household in the top decile spends over three times as much as a household in the lowest. The distributional effects of grocery taxation diverge sharply from most policymakers’ expectations, which has dramatic ramifications for this ongoing debate and suggests better ways to achieve policymakers’ desired aims.”
Sales taxes are more stable and pro-growth than other forms of taxation – especially income taxes. Policymakers can better serve citizens by adopting higher yearly grocery tax rebates and focusing additional tax relief on reducing income taxes.
By adopting both the increased grocery tax rebate proposed by HB 61 and the income tax relief proposed by HB 40, Idaho lawmakers have the opportunity to continue to build on the impressive tax relief efforts they’ve been enacting over the last several years.
Jason Mercier is Vice President and Director of Research of Mountain States Policy Center, an independent research organization based in Idaho, Montana, Eastern Washington and Wyoming. Online at mountainstatespolicy.org.
