Lean and hungry
The Nevada public killed the food tax. Legislators want it back.
Nevada Assembly Republican floor leader Pete Goicoechea of Lander County last week called for bringing back a sales tax on food.
It was a major campaign gift for Democrats, but they made little of it. Neither Democratic candidate for governor Rory Reid nor any Democratic leader spoke up against the proposal.
“I believe that we should have had a 2 percent sales tax on food on the ballot this fall,” Goicoechea said on Sam Shad’s Nevada Newsmakers program.
Sales taxes were imposed by the Nevada Legislature in 1955 as a response to soaring school expenses as a result of the post-world war baby boom. They were supported by teachers and parents.
Five years later, a massive study commissioned by state government of Nevada’s tax structure characterized sales taxes as “sucker” taxes because their gradual rate of collection made them popular with members of the public who had no idea how heavily they were being taxed. Such a theory of taxation “has no place in the formulation of a sound tax program,” the report’s authors said, apparently unaware that they had also identified the appeal of sales taxes for politicians.
“It’s a hidden tax that doesn’t penalize politicians,” columnist and labor activist Andrew Barbano said last week.
Since the 1955 imposition of a 2 percent sales tax, it has been raised several times. The current state portion of the tax, 6.85 percent, is now one of the highest state sales taxes in the United States. Only seven states are higher. It is supplemented by various add-ons, such as a Washoe County infrastructure tax.
Food was exempted from the sales tax by public vote after a long effort by Mary Gojack of Washoe County in the 1970s. Gojack, first an assemblymember and then a senator, kept pushing for an end to the food tax but was stymied in the legislature. So in 1978 she, Washoe Assemblymember Steve Coulter and a legion of volunteers around the state gathered signatures on an initiative petition to repeal the food tax.
The petition failed to qualify for the ballot, but not by much. The strong showing in signature gathering made it clear to legislators that if they failed to act, the repeal would eventually make it onto the ballot. So they passed a repeal measure and sent it to the voters, who approved it 78 to 22 percent in 1979.
Gojack died in 1985, but her longtime ally, former Republican lieutenant governor Sue Wagner, responded to Goicoechea: “When I read this, I thought immediately of my friend Mary, who spent a tremendous amount of time and energy in her life to get the tax removed. … I would hope that there would be other legislators [who] will be there to carry on her fight. … I think it would be an unfortunate thing to do, particularly in a recession, when it is a regressive tax.”
Barbano said, “May I pull a Yogi Berra on you? If Mary Gojack was alive, she’d be turning over in her grave.”
As the news of the proposal spread, Nevada Taxpayers Association executive director Carole Vilardo started getting calls—“Lots of calls asking for explanations of why, and isn’t it regressive?” she said.
While Vilardo’s members—mostly businesspeople—were inquiring into the regressiveness of a tax on food, the silence of Democrats on the same aspect of the issue was thunderous. Goicoechea’s tax increase would hurt the working poor, often thought of as the core of the Democratic base. It was a priceless opportunity to oppose a tax increase—one proposed by Republicans, no less—but the Democrats missed their cue.
“I can’t explain it,” said political analyst Fred Lokken. “It seems like a gift from God.”
“It shows you what no-accounts the Democrats are,” Barbano said. “It’s a golden opportunity to oppose a tax increase, and it shows you that for the most part, Democrats don’t win elections, Republicans lose them. Their not taking advantage of that is really the height of political incompetence.”
But it may not have been a missed opportunity. It may have been intentional. Nevada Democratic leaders in recent years have shown a penchant for regressive revenue measures, particularly those supported by teacher lobbyists. In 2005, Democratic leaders like Assembly Speaker Richard Perkins, Assembly floor leader Barbara Buckley and Senate floor leader Dina Titus supported a state lottery, which one study said drains “almost three times as much” money from the working poor as from wealthier households.
At last year’s legislature, which had heavy Democratic majorities in both houses, lawmakers created a new car registration renewal system that increased renewal fees for older vehicles that are more likely to be owned by low income people.
Goicoechea tried to portray a food tax as a “reform” and said regressive taxes are the ones on business.
“But I do believe we’re going to have to have some revenue increases, and I would hope they come in the way of reforms,” he said. He spoke of “reducing some of these other very regressive taxes on business.”
But tax experts say a tax on food is the very definition of a regressive tax—one that soaks the poor.
“As a share of income, food taxes are typically four to five times as high for poorer families as for upper-income families,” according to a report by the Center on Budget and Policy Priorities. “Although other state taxes are levied heavily on the less-advantaged, few are so regressive—that is, absorb such a greater proportion of income for the poor than for the well-off. … A household with income between $30,000 and $39,999 spends about the same $3,200 a year on food, but that expenditure represents only 9 percent of its income. A household with income of more than $70,000 spends about $4,500 or 4 percent of its income on food.”
Barbano said, “It’s a disaster. … Nevada has the most regressive taxes in the nation, and this is just another way to screw the middle class as well as the poor.”
Barbano also said the history of Nevada’s sales tax shows legislators will keep going back for more. “Once you open the door to something like that [Goicoechea tax hike], it becomes very convenient for government to ratchet up that sales tax every time they think they need more revenue.”
If Nevada revives the food tax, it will be going against the national trend. The latest state to get rid of it was South Carolina, in 2007. Thirty-one states and the District of Columbia exempt most food from sales taxes. Utah has been gradually reducing its sales tax on food from from 4.75 percent to 1.75 percent. Five states tax groceries but offer credits or rebates to low-income people, though that requires creating an administrative structure to take in the tax and then return it to residents, and they are not generally believed to restore full value.
Only two states now apply the full state sales tax to food without any abatement or amelioration. They are Alabama and Mississippi, states with which Nevada is often grouped in national quality of life rankings, usually at the wrong end.
If the Democrats were loathe to criticize a new food tax, some residents were not. Reader comments on stories about the GOP proposal were mostly hostile. Samples from the Las Vegas Sun:
“I am so tired of these tax and spend Republicans. If it’s not starting a trillion dollar unfunded war in Iraq, it’s taxing a necessity like food.”
“This is a natural idea for a Republican—a tax that eats up a greater percentage of a poor family’s income than of a rich family’s income, and that they can’t avoid. … We gotta increase taxes on the working poor, so we don’t have to do something awful, like create a progressive income tax that falls disproportionately on those benefiting the most from participation in our society!”
“Of course, tax food. Don’t tax the people that got rich here. Tax the people who eat.”