Taxes on Food or Gas?

Locally produced food in a grocery store.

Locally produced food in a grocery store.

With tight budgets abounding, Utah lawmakers are considering increasing taxes on food. That article doesn’t go into great detail about what the increased revenue would be used for, but it does quote state senator John Valentine as saying that it’s needed to provide services for low income individuals.

Those individuals would also get a tax credit to avoid suffering from the tax hike:

Sen. John Valentine, R-Orem, is proposing targeted relief for low-income Utahns through a refundable credit to help defray the cost of groceries for the state’s poor and a refundable income tax credit for its low-income workers.

The article has more information on the credit, though it sounds sufficiently convoluted from the quote that a lot of people probably wouldn’t take advantage of it.

But in any case, it’s a curious situation because food is far from the only thing that could be subjected to higher taxes. For example, this Atlantic Cities article explores the possibility of increasing fuel taxes.

Rather than raise taxes on food, why not raise them on gas?

Rather than raise taxes on food, why not raise them on gas?

The article notes that increasing fuel taxes can be “political poison.” It also argues that rather than framing the issue as a tax increase, it should be framed as an end of the gas sale:

[…] instead of framing the gas tax discussion as a sudden “increase,” it seems just as accurate to say that the big sale on gasoline that’s been going on for years is finally ending. For sure, lawmakers must address the regressive impact of new fuel charges; the I.T.E.P. recommends low-income tax credits as one mitigating tool. They might also do well to address the view that what they’re asking for isn’t to raise taxes on transportation at all — it’s to finally collect them.

The interesting thing here is that these articles offer two possibilities for raising revenues. One option would raise money while de-incentivizing driving — an environmentally destructive activity for which there are alternatives — while the other would simply make food more expensive. The situation in Utah isn’t an “either-or” right now, but the point is just that it’d be better to raise taxes on harmful activities like driving than directly on food.

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2 Comments

Filed under economics, Food

2 responses to “Taxes on Food or Gas?

  1. Jesse

    I know this is an old post. But I was just discussing raising gas taxes with a friend and he was abhorred with the idea of it because it indirectly raises the taxes on all commodities, including food (because of greater transit cost for distributors). So by his logic, food prices would have to go up because of greater transit costs for the sellers.

    My searches on the interwebs have so far been futile to find anything to address that concern. I guess besides the fact that a tax increase would likely be small compared to what we pay for other services we enjoy (as argues in the Atlantic article you link too). Any other ideas? Links?

    • I’ll have to look around for some links. But your friend’s argument makes sense to me — to a certain point. I think it’s true that raising taxes on fuel would increase food prices. However even accepting that it seems better to me to discourage driving while raising prices.

      The fuel system also seems larger — the burden would be shared by industry and commerce for example — so a smaller tax, and therefore collateral increase in food prices, would generate more revenue. Food is ultimately a vet small and cheap commodity compared to fuel, so I think doing a tax tax would disperse the cost more.

      Local (state) fuel also only amounts to a small part of food costs.

      All that said, I don’t understand why someone would actually favor a food tax to a gas tax if they’re concerned about food costs. Either way they’re going up but if fuel is taxed at least we disincentize a destructive behavior and keep costs minimal.

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