Dive Brief:

• Tennessee governor Bill Haslam introduced an omnibus plan that includes reducing the state’s grocery tax from 5% to 4.5%, according to an article in The Tennesean.
• The move would cut $55 million in funding to the state, and follow $60 million in grocery tax reductions achieved by Haslam since he took office in 2011.
• The overall plan also includes a 7-cent increase in the state’s gas tax rate, and new fees on electric cars and rental cars.

Dive Insight:

Tennessee is one of just 13 states that tax groceries. Those states, along with municipalities around the country that uphold the practice, like the steady revenue the tax brings in.

But grocery taxes are vehemently opposed by trade organizations, consumer watchdogs and other groups who note that it disproportionately impacts low-income consumers who spend a higher percentage of their incomes on groceries.

According to the Pew Charitable Trusts, some of the most food-insecure states in the country are ones that still maintain grocery taxes. Some areas, like Tuscaloosa County, Alabama, add a local tax on top of a state tax, bringing the rate to 9% or higher.

In all, about a third of U.S. counties have grocery taxes, charging an average rate of 4.3%. This means Tennessee’s proposed tax would fall more in line with the national average. But many politicians, both Democrat and Republican, would prefer to see the taxes lowered further, if not repealed altogether. Doing so, however, would take away hundreds of millions of dollars in revenue.

Kansas, which has the nation’s highest tax rate at 6.5%, arguably makes the case against grocery taxes. According to a study by Wichita State University, many Kansans skirt the tax by “border hopping” for groceries in Nebraska or Colorado, which are tax-exempt, or to Missouri, which has a tax of 1.2%. In 2013, researchers estimate the state lost out on $345.6 million in grocery sales from border hopping.