Suzanne Bailey, of Provo, was talking with her brother when she discovered the details of the tax reform recently passed by the Utah Legislature. Her brother told her that, as part of the reform, the tax on grocery items will nearly triple next year.
As Bailey finished her grocery shopping at Smith’s in Provo on Tuesday, she said she understood the need for raising taxes but worried about how a food tax increase would impact her family.
“The hard thing for me is (that) I’m a single mom of four kids,” Bailey said. “And I get paid decent money, but I think most people would agree that we don’t get increases in our yearly pay … (to keep up with) the increase of food or gas or things like that.”
On Dec. 12, state lawmakers held a special session and passed sweeping tax revisions that cut Utah’s income tax and increased the state’s sales tax. As part of Senate Bill 2001, the state tax imposed on food and food ingredients will go up from 1.75% to 4.85%, an increase of more than 277%, according to the bill’s text.
“It’s hard for us (residents) to keep up,” said Bailey, adding that she works in dentistry and hasn’t had a pay increase in 13 years.
Bailey estimates that she spends at least $200 per paycheck on groceries, meaning she currently pays about $3.50 to the state in sales tax on grocery food every two weeks. Next July, when S.B. 2001 takes effect, that amount will increase to around $9.70.
That may not seem like much, but it quickly adds up, said Alex Cragun of Utahns Against Hunger.
“Especially when it comes to individuals that are living on (the) margins or where their budget is pretty tight and they don’t have a lot of flexibility,” said Cragun.
Data shows that 1 of every 9 Utah households experiences food insecurity, Cragun said, which is defined as not having reliable access to or the financial means to purchase nutritious food.
Utahns Against Hunger estimates that the tax hike will increase food insecurity in the state by nearly 2%, according to Cragun.
Across the state, the group predicts that the tax hike will cost the average family of four an additional $7 a week, or an additional $364 a year.
“It’s a pretty big chunk of change for your family” if you are middle or low-income, he said.
Included in the tax reform is a rebate for low-income families.
When qualifying individuals file their taxes, they can claim a refundable grocery tax credit of $125 per person in their household. After the fourth individual in the household, the tax credit goes down to $50, meaning a qualifying family of five would receive $500 in credit.
Still, Cragun worries that people in poverty may not be able to wait until tax season to be reimbursed, and others may not be aware of the refundable credit.
“Our concerns are that people will fall through the cracks and will be harmed because of this tax policy,” Cragun said.
When asked how the new tax legislation would impact his monthly grocery budget, Provo resident Jason Roundy said “probably not that much.”
“But I think this increase is probably going to hurt lower and middle class families,” Roundy said. “Big time.”
David Dahl, also of Provo, said he didn’t support a state tax on groceries of any kind.
“I don’t think they oughta put a tax on food,” Dahl said. “Everybody’s got to have that.”
One thing that influences Dahl’s position is concern for struggling and poor residents, he said.
“A (homeless man) that walks in off the street to pick up something to stuff in his mouth shouldn’t have to pay a tax on it,” he said.
During his December press conference on Thursday, Utah Gov. Gary Herbert announced that he had signed the tax reform legislation.
The governor addressed concerns with how the grocery tax increase will impact low-income residents, but said the tax credit will help poor residents and the overall reform will benefit the state as a whole.
“I would remind everybody that sales tax dollars spend every bit as well as income tax dollars,” Herbert said.
Kathy Givens of Circles Utah Valley, a program that helps struggling families and individuals reach financial stability, said the impact of the grocery tax increase will be “really small compared to the larger needs that we need to focus on if we’re really hoping to help the poor.”
“There are far greater factors that are keeping people in poverty,” Givens said, such as a lack of affordable housing or jobs that pay a livable wage.
But Givens acknowledged that the food tax increase would have an impact on many of the families that Circles Utah Valley works with.
“They don’t have a lot of wiggle room,” she said. “They’re living paycheck to paycheck.”
Roundy, of Provo, said he thought the increase would be a detriment to the state.
“I think it’s a terrible choice,” Roundy said.
“Our concerns are that people will fall through the cracks and will be harmed because of this tax policy.”— Alex Cragun,
Utahns Against Hunger