States Shouldn’t Cut Grocery Taxes Entirely, Just Refine Them

With grocery prices remaining high, several states are looking at eliminating grocery sales taxes to provide relief. But rather than imposing blanket cuts that would strain state budgets that are already in a crunch, a targeted approach would be smarter and more sustainable.

At first blush, cutting grocery taxes seems like a reasonable response to budget constraints—after all, food is a necessity. Leaning on state coffers to provide some relief might make sense politically, but states are already struggling to balance their budgets. With potential federal funding cuts looming over programs such as the Supplemental Nutrition Assistance Program and other critical support initiatives, few states can afford to slash another revenue source without suffering service provision consequences.

Two viable alternatives stand out: an income-targeted grocery tax exemption, which would ensure relief reaches those who need it most while preserving essential revenue, or allowing municipalities to retain grocery taxes and reinvest that revenue into local low-income assistance programs.

Both solutions would offer relief while aiding financial stability. State leaders should recognize there are smarter ways to address tax burdens and, when it comes to providing relief for taxpayers who are suffering most, not all tax cuts are created equal.

Some states are facing mounting fiscal pressures due to previous tax cuts, expanded spending obligations, and the expiration of post-pandemic funding—coupled with the after-effects of Covid-19-era market activity.

Take the cautionary tale of Arizona, where the 2021 implementation of a flat tax was partially to blame for a fiscal year 2025 $1.6 billion budget deficit that needed to be filled by slashing spending on higher education. Or West Virginia, where sweeping post-pandemic tax cuts left the state with a significant budget shortfall and the potential for low-income and disabled students to bear the consequences.

When states eliminate revenue sources without replacing them, they often end up cutting the programs low- and middle-income families rely on. If the federal government is sending more basic services back to the states, now isn’t the time to cut state revenue streams—especially with Elon Musk’s Department of Government Efficiency potentially putting federal funding for state-administered programs on the chopping block.

Shoppers wait in line at a Publix store.

Photographer: Seth Herald/AFP via Getty Images

Although grocery taxes are regressive, a full repeal without a plan to offset lost revenue would be a short-term political win with the prospect of long-term consequences.

Families with less total income spend a larger share of that income on food, so a sales tax on groceries hits them harder than wealthier households. An income-based exemption would provide tax relief where it’s needed, and this broad idea already exists in practice.

Idaho provides a credit for low-income taxpayers for grocery taxes paid throughout the year. A more ambitious model could function similarly to SNAP eligibility, where households below a certain income level can qualify for an exemption at checkout.

This would eliminate the need for low-income taxpayers to front the cost of the grocery tax and wait for a credit at filing time. In turn, this would help ensure families struggling with food insecurity aren’t taxed on essentials while maintaining some level of sales tax revenue from those who can afford to foot the bill.

Such a policy would functionally eliminate the regressivity of the grocery tax but would avoid a full repeal that could destabilize state budgets or exacerbate revenue shortfalls. A program designed to provide at-checkout relief for low-income taxpayers would be adaptable. As economic conditions shift, eligibility criteria could be adjusted to reflect changes in inflation, wages, and fluctuating necessity costs.

If governors are determined to eliminate grocery taxes at the state level, they should at least allow local governments to retain them and earmark that revenue for targeted low-income assistance programs. Not all municipalities within a state have the same relative ability to pay a grocery tax, so allowing individual municipalities to make such decisions is logical.

Municipalities could use retained grocery tax revenue to institute or expand local food assistance programs, fund childcare subsidies, or support public transportation initiatives that make it easier for low-income workers and shoppers to access jobs and grocery stores. This model would balance fiscal responsibility with meaningful relief and ensure tax cuts designed to help low-income families don’t inadvertently harm them by leading to removal of state services they rely on.

In addition to making good economic and policy sense, targeted exemptions or local control over grocery tax revenue is likelier to gain long-term bipartisan support by avoiding unintended consequences. The public interest is best served through tax relief that’s sustainable—not merely expedient.

Andrew Leahey is a tax and technology attorney, principal at Hunter Creek Consulting, and practice professor at Drexel Kline School of Law. Follow him on Mastodon at @andrew@esq.social

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