Tuesday, January 16, 2001
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Posted on: Tuesday, January 16, 2001

Food tax repeal popular but isn't all that simple

It is a measure of the political potency of the idea that a majority of the state legislators due to take office tomorrow support the repeal of the excise tax on food.

According to a survey conducted by The Advertiser’s Capitol Bureau team, a solid majority in both the House and Senate support an end to the 4 percent tax on food purchases.

House Republicans, newly aggressive since they have enough members to force bills out of committee and to the floor for a vote, say they will do exactly that if the food tax exemption is bottled up.

And they should, since the food tax repeal was a core element in the platform of virtually every Republican who got elected last year.

But forcing a vote won’t do the trick in and of itself. That’s because despite the idea’s popularity, there remains a good chance it will not happen. Key Democratic leaders have already raised doubts.

It would come on the heels of recent income tax cuts and in the face of increasing demands for new state spending — particularly in the field of education.

So before anyone votes to end the food tax, they must identify — specifically — the $100 million or so a year in programs or operational spending that would go down with it. That won’t be easy.

A close analysis of the food tax would show it has benefits as well as drawbacks to Island families struggling to balance their pocketbooks. It provides a steady year-to-year base for excise tax collections, which makes it easier to conduct prudent and reliable long-term budget planning.

The food tax is also "exported" to the degree that visitors or part-time residents who do not pay income taxes here help the tab. Eliminating the tax entirely would lose this tax base.

It is true that the food tax is regressive, in the sense that it applies equally to the poor and the rich; a carton of milk is taxed identically no matter how much income you might have.

For that reason, the state at one time had a particular tax credit aimed at offsetting the impact of food taxes. If the regressivity of the tax becomes a serious issue this year, an alternative to elimination might be to re-instate a credit — particularly for low-income families.

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