The Impact of Grocery Taxes on Hunger in America

Many Americans view hunger as a distant issue, picturing it as a challenge faced by other countries. Images of failed harvests and refugee camps come to mind, projecting the problem onto poorer nations. However, statistics reveal that hunger is present within the United States too. The USDA reports that approximately 14% of U.S. households experience food insecurity. Furthermore, one in five children live in homes where accessing nutritious food is difficult. Hunger is a reality in the U.S., affecting urban, suburban, and rural communities.

Factors Contributing to Food Insecurity

The causes of food insecurity in America are identifiable. Soaring housing costs have stretched household budgets. Many workers see wages lagging behind inflation. The costs of gasoline and utilities further squeeze finances. Additionally, rising food prices force families to make tough choices such as choosing between paying rent or buying groceries, and between purchasing medicine or dinner.

The Role of Grocery Taxes

While these issues are discussed, grocery taxes often escape scrutiny. Most states abstain from taxing groceries, recognizing it as a necessity. Nevertheless, nine states still levy taxes on groceries. In certain areas, these taxes can elevate to nearly 9%. These states frequently exhibit the highest levels of food insecurity. For families already stretched thin, even a minor tax hike on groceries can significantly impact their finances.

Research conducted by university researchers, including myself, indicates that an increase of 1 percentage point in grocery tax correlates with almost a 1% increase in the likelihood of food insecurity among low-income households. This suggests that grocery taxes may exacerbate hunger.

Regressive Nature of Grocery Taxes

Grocery taxes are inherently regressive, disproportionately impacting lower-income families compared to wealthier ones. Those most vulnerable to hunger bear the brunt of this policy. Retailers often exacerbate the situation by “over-shifting” taxes onto consumers. This means that stores may raise prices beyond the tax amount. Research indicates that for every dollar of grocery tax revenue, consumers pay an average of $1.44 more at checkout. Discount and dollar stores, frequented by lower-income families, see an even greater impact.

Policy Implications

State-imposed grocery taxes aim to generate revenue, not worsen hunger. Yet, evidence suggests that these taxes might do just that. Although grocery taxes are not the sole reason for hunger, they are a direct influence, affecting choices made at the checkout. Unlike broader economic factors, the authority to adjust or eliminate grocery taxes lies with state governments.

Removing grocery taxes would necessitate finding alternative revenue sources for states. However, policymakers have better options. Implementing progressive tax systems, where those more capable contribute more, could alleviate pressure on struggling families and improve food security. Property taxes or targeted levies on alcohol, tobacco, and heavily processed snacks could be less burdensome than grocery taxes.

Rethinking Public Finance

A society that prioritizes addressing hunger should not increase the cost of basic needs for those least able to afford them. While public policy involves trade-offs, some are harder to justify. Taxing groceries may seem administratively simple and politically convenient. Yet, its effects disadvantage those least equipped to handle the additional burden, potentially aggravating the hunger issue already challenging the country. Hunger need not be inevitable; it is the result of choices, including the decision to tax essential food items.

Harry M. Kaiser is the Gellert Family Professor of Applied Economics and Management at Cornell University.
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