Groceries Nationwide Continue to Cost a Fortune—Here’s Why More States Aim to Eliminate Taxes on Them

LITTLE ROCK, Ark.—Over the years, the number of states charging sales taxes on groceries has diminished, and this trend may continue as lawmakers respond to rising complaints about the costs of eggs and essential household items.

On Tuesday, Arkansas Governor Sarah Huckabee Sanders outlined her plan to eliminate the remaining 1/8 cent sales tax imposed on groceries by the state. Similarly, lawmakers in Tennessee, Mississippi, and Alabama are pushing for reductions in grocery taxes.

These initiatives come amid budget uncertainties for states, tied to potential cuts in federal programs being considered by Republicans in Washington. Advocates for tax reductions highlight surging egg prices as a justification for immediate action.

“We’re eliminating Arkansas’ most regressive tax and providing assistance to those who need it most,” Sanders, a Republican, stated during a news conference on the proposal.

Recently, the number of states taxing groceries has dropped, with laws to remove grocery taxes enacted in Oklahoma and Kansas within the past year. Virginia’s grocery tax elimination took effect in 2023, and Illinois is set to eliminate its 1 percent grocery tax next year.

Currently, nine states impose sales taxes on groceries: Arkansas, Hawaii, Idaho, Illinois, Mississippi, Missouri, South Dakota, Tennessee, and Utah. Hawaii and Idaho, however, provide tax credits to their residents to help mitigate the tax burden.

In Tennessee, GOP legislative leaders have proposed the elimination of the state’s 4 percent sales tax on groceries. This follows failed attempts by Democrat lawmakers to introduce similar measures, who point out that some Tennessee residents pay up to 6.75 percent in sales taxes on necessities like bread and milk, due to local sales tax variations.

However, the fate of a Republican-backed bill in Tennessee remains uncertain. State revenue is projected to be tighter, and Governor Bill Lee did not propose a tax cut in his budget or include a grocery sales tax holiday, which has been a staple of his legislative agenda.

House Majority Leader William Lamberth, one of the bill’s sponsors, mentioned that the bill could be adjusted to focus only on essential items that significantly impact consumers’ finances, rather than on junk food.

“Milk, eggs, bread—those are a great starting point,” Lamberth remarked.

In Alabama, Democrat lawmakers are expected to propose a bill that aims to eliminate the state’s remaining 3 percent grocery tax. In 2023, legislation was passed to gradually reduce the rate from 4 percent to 2 percent.

Democrats emphasized the urgent need for relief for families.

“If we genuinely want to assist working families, the most effective method is to reduce their tax burden and provide them with peace of mind when they pay their rent or shop for food,” said Democrat state Rep. Adline Clarke in a press release.

For decades, proposals to remove the grocery tax have been discussed but have failed due to concerns about potential losses in education funding.

Mississippi lawmakers are currently working on a tax cut package to reduce the state’s 7 percent grocery sales tax.

Other grocery tax cut initiatives have faced hurdles, such as South Dakota voters rejecting a measure last year that sought to eliminate the state’s grocery tax.

Arkansas had nearly eradicated the grocery tax under the previous administrations of Democrat Gov. Mike Beebe and Republican Gov. Asa Hutchinson. The only remaining tax is the 1/8 cent charge imposed by a voter-approved constitutional amendment for outdoor programs.

Removing this tax will cost Arkansas approximately $11 million annually, a figure that Sanders believes the programs can accommodate.

While reducing or eliminating grocery taxes can help create a less regressive tax system, it comes at a time when states might face increased costs due to federal budget cuts.

States might consider alternative cuts like earned income tax credits or child care tax credits, suggested Aidan Davis, state policy director for the Institute on Taxation and Economic Policy.

“If the aim is to help people meet their basic needs, then a more targeted approach would make a lot of sense,” Davis concluded.