Lt. Gov. Ralph Northam made rolling back at least some of Virginia’s sales tax on groceries part of his bid for governor Monday.
The campaign said Northam wants to end the tax for lower-income Virginians, presumably leaving it in place for those above an as-yet-undecided salary threshold.
At least three states, Kansas, Oklahoma and Idaho, have used income tax credits to refund grocery sales taxes to some residents. That’s a possibility in Northam’s plan, campaign spokesman David Turner said, though the goal is to address the tax’s regressive nature without increasing administrative burden.
Specifics would be ironed out by a commission the Democratic hopeful wants to drill down on across-the-board tax reforms, Turner said. The campaign said in a news release that a broader set of guiding principles will be released later this week, and that Northam wants a system that’s “simpler, fairer and more progressive.”
Former U.S. Rep. Tom Perriello has also promised a tax plan this week, and has suggested during campaign stops that he believes corporations and the wealthy should pay more. Asked his thoughts on Northam’s proposal Monday, Perriello, who was campaigning on the Peninsula, said he’d wait to see details.
On the Republican side of this race, front runner Ed Gillespie is promising a phased-in 10 percent cut in the income tax rate and Prince William County Board of Supervisors Chairman Corey Stewart has said he wants to gradually draw income taxes down to zero. State Sen. Frank Wagner, R-Virginia Beach, has said both plans are unrealistic, and he wants to raise the state’s gasoline tax slightly to boost transportation construction.
Virginia charges 1.5 percent on groceries, as opposed to restaurant meals, with another penny-on-the-dollar option for localities. Whether Northam’s plan would target the local revenue along with the state’s will be looked at by the commission, Turner said.
Without more detail, it’s unclear how much money Northam’s proposal would return to taxpayers and cost the state budget.
Groceries have been taxed at a lowered rate — the state sales tax on other items is 4.3 percent, plus local tack-ons — since 1999. It was brought to its current level in 2005. If groceries were taxed like other items it would generate more than $525 million a year in additional revenue for the state and its localities.
A 2014 review of the tax break found that more than $307 million of that benefits households earning $70,000 or more a year. The review found that the break also helps lower income households “significantly,” though, in part because they spend a greater share of their incomes on basic necessities.
Those earning less than $15,000 a year spend an average of 30.7 percent of their pre-tax income on groceries, according to the study by the General Assembly’s legislative services staff.
That study also found that 33 of the 46 states that have a sales tax exempt groceries from it. Six of the 13 states that tax unprepared food tax it at a reduced rate, the report found.
Fain can be reached by phone at 757-525-1759.
