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The Tax Foundation is the nation’s
leading independent tax policy
research organization. Since 1937,
our research, analysis, and experts
have informed smarter tax policy
at the federal, state, and global
levels. We are a 501(c)(3) nonprofit
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Editor, Rachel Shuster
Designer, Dan Carvajal
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The Surprising Regressivity of
Grocery Tax Exemptions
• Exempting groceries from the sales tax base reduces economic efficiency
without achieving its objective of enhancing tax progressivity.
• The poorest decile of households experience 9 percent more sales tax liability
with a grocery tax exemption than they would if groceries were taxed and the
general rate were reduced commensurately.
• Grocery tax credits provide actual progressivity at a lower cost than the
broad exemption of groceries. Under a revenue-neutral expansion paired
with a $75 per person credit, the poorest decile of households would save 31
percent on sales tax liability.
• Sales taxes are more stable and pro-growth than many other forms of
taxation, especially income taxes, so policymakers have an opportunity to
increase tax progressivity, enhance revenue stability, and improve economic
competitiveness by taxing groceries, providing a credit, and using the
remaining revenue from base broadening to cut income taxes.
Vice President of State Projects
TAX FOUNDATION | 2
It is commonly assumed that the exemption of groceries from state sales tax bases has a progressive
effect, with a distribution of benefits which favors low- and middle-income taxpayers. It is primarily
upon this basis that lawmakers in most states have carved groceries out of the sales tax base. The
assumption is simple and, on the surface, reasonable—and it is wrong. As counterintuitive as it may
seem, the lowest decile of h