LITTLE ROCK, Ark. — Over the years, the number of states imposing sales taxes on groceries has steadily decreased, with further reductions anticipated in response to growing concerns about the high cost of essentials like eggs and other household items.
Arkansas Governor Sarah Huckabee Sanders disclosed details on Tuesday about her plan to abolish the remaining 1/8th of a cent sales tax on groceries. Similar legislative initiatives are underway in Tennessee, Mississippi, and Alabama, with calls from lawmakers to lower grocery taxes.
These proposals arise amidst financial uncertainties as states anticipate budget constraints due to potential federal program cuts, such as those in Medicaid, proposed by Republicans in Washington. Advocates for these tax cuts argue that escalating prices for groceries underscore the urgency of these measures.
“We’re eliminating Arkansas’ most regressive tax to aid those who need it most,” Sanders, a Republican, stated during a news conference outlining the proposal.
The reduction of grocery taxes among states has progressed, with several laws enacted over the past year eliminating this tax in Oklahoma and Kansas. Virginia executed a similar law in 2023, and Illinois is poised to follow suit with a 1% grocery tax elimination set for next year.
Although grocery sales taxes persist in nine states—Arkansas, Hawaii, Idaho, Illinois, Mississippi, Missouri, South Dakota, Tennessee, and Utah—some states like Hawaii and Idaho offset these taxes with resident tax credits.
In Tennessee, Republican leaders have suggested repealing the state’s 4% sales tax on groceries. Prior Democratic attempts to eliminate the tax have been unsuccessful, often citing the burden on residents who face composite sales taxes up to 6.75% on necessities like bread and milk.
Nonetheless, it remains to be seen how a Republican-endorsed bill would proceed in Tennessee, where the GOP dominates. With tighter state revenues, Governor Bill Lee did not propose a grocery sales tax cut nor include a tax holiday in his budget agenda.
House Majority Leader William Lamberth, a sponsor of the repeal, indicated that the bill might focus on necessities that most impact consumers’ budgets, such as milk, eggs, and bread.
Alabama’s Democratic lawmakers, anticipating similar initiatives, intend to eliminate the state’s remaining 3% grocery tax. A recent reduction from 4% to 2% received legislative approval. Democrats argue this reduction is crucial for families’ financial relief.
“If we are serious about bolstering working people’s financial progress, reducing taxes allows for greater stability when managing rent and grocery expenses,” stated Democratic Representative Adline Clarke in a released statement.
Despite decades of discussions, proposals to remove grocery taxes faced challenges due to concerns over lost educational funding.
In Mississippi, a legislative package aimed at reducing the state’s 7% sales tax on groceries is under review. However, South Dakota saw its voters reject an effort to repeal the state’s grocery tax last year.
In Arkansas, earlier administrations, including those led by Democratic Governor Mike Beebe and Republican Governor Asa Hutchinson, substantially diminished the grocery tax. The remnant 1/8th tax, linked to a constitutional amendment for outdoor program funding, is next on the list for elimination.
Sanders pointed out this removal would cost Arkansas nearly $11 million annually, a figure she believes can be absorbed.
Eliminating grocery taxes could render a state’s tax structure less regressive but coincides with potential extra costs linked to federal budget reductions. Alternatives like child care or earned income tax credits might also be explored, as advised by Aidan Davis, state policy director at the Institute on Taxation and Economic Policy.
“A targeted approach to ensure people can meet their financial needs is meaningful,” Davis remarked.