It took 25 years, but Republicans finally fulfilled the promise to eliminate food tax!

Weekly Opinion Editorial

HIDE THE PEA!

by Steve Fair

 

     According to the U.S. Bureau of Labor Statistics, the average Oklahoma family spends about $240 per week on food.  Oklahoma citizens are paying about $600 in state sales tax each year when they buy groceries.  Last week, Oklahoma Governor Kevin Stitt signed HB #1955, which will eliminate the 4.5% state sales tax on groceries.  It will not go into effect until August 2024.  The grocery sales tax cut is estimated to reduce state government revenue by $418 million. 

Governor Stitt and Speaker of the House Charles McCall, (R-Atoka), are advocating a ¼% reduction in the state income tax, but Senate President Pro-Tempe Greg Treat, (R-Edmond) says the Senate won’t agree to that proposal this year.  Three observations: 

     First, eliminating the grocery tax makes sense.  Oklahoma is one of only thirteen states still taxing food.    Because people have to eat, taxing food tends to hurt poor people more than the rich.  Poor people spend a larger percentage of their income on food.  Texas, New Mexico and Colorado don’t tax food, Kansas is eliminating their grocery tax, and Arkansas taxes food at 1.25%. This action just gets Oklahoma in line with bordering states.

    Citizens in Oklahoma have been lobbying the legislature for years to stop taxing food.  In the late 1990s, former State Rep. John Sullivan, (R-Tulsa) ran a bill for three straight sessions to eliminate the tax on food.  With tax and spend Democrats in the majority, Sullivan’s bill received little traction.  During the push by Republican in the early 2000s to win legislative races, elimination of the grocery tax in Oklahoma was a mainstay on most candidate push cards and campaign material.  It took just 25 years, but Republicans finally fulfilled the promise.

      Second, Oklahomans will still pay sales tax on food.  HB#1995 eliminated only the state portion of the sales tax (4.5%).  Municipalities, cities and counties will still assess tax on food.  In many cases, that amount is as much as 5.5%.    Those entities are not likely to follow the state’s lead in removing the tax on food, because they depend on the tax revenue to provide basic services. 

     Third, a consumption tax is a fair way to tax.  The grocery tax was a consumption tax. A consumption tax taxes people when they spend money.  The state (and Federal) income tax is assessed when you earn money, or get interest, dividends, or capital gains.  Consumption taxes are paid as retail sales tax, excise tax, use tax and import duties.   It isn’t regressive and has few ‘loopholes’ or codes.  Consumption taxes encourage saving and not spending.  

     Oklahoma government will still get a large percentage of revenue from sales tax.  The state gets a large amount of funding by taxing the oil industry (gross production tax).  Governor Stitt wants to eliminate the state’s 4.25% state income tax.  If that is done, how will Oklahomans fund state government?  Where would state government get money?  Will Oklahomans give up basic services to pay less taxes?  Is Oklahoma state government so bloated that state employees and services can be eliminated and no one notice?  Probably not. 

     No one likes taxes, but they are a necessary evil.  Knowing when you are paying tax is crucial and Oklahoma just eliminated a transparent one.  The grocery tax was the devil you knew. No one liked paying grocery tax, but they understood it- it wasn’t hidden.  Will state government have to make up the loss of $418 million each year, and if so how?  Taxpayers beware! Let the hide the pea game begin!