Putting a food tax on groceries on the table: evidence for food security policymakers

https://doi.org/10.1016/j.foodpol.2021.102098

U.S. grocery taxes vary across both states and counties, and it appears that 16 states have begun to impose grocery taxes in 2020. Several states appear to be in a situation where they are debating whether to continue or eliminate such taxes, but the extant literature suggests that the relationship between these factors as contributing to food insecurity is unclear.

We present county-level panel data on grocery taxes from 2006-2017 and find that jurisdictions with grocery taxes are among the most food insecure in the country. Rolling back the grocery tax could theoretically exacerbate food insecurity. Linking tax data with other data from county-level food insecurity measures and demographic studies, and treating the grocery tax as exogenous, we estimate that a 1 percentage point increase in the grocery tax rate would increase the probability of food insecurity for low-income households by 0.84 percent.

We run a policy simulation of a grocery tax in six states in which these estimates are used to assess the potential impact on food insecurity.

One caveat is that the estimates will tend to approach or move away from zero, depending on whether the increase in the intra-county grocery tax over time is positively or negatively correlated with unobservable impacts on food security.

However, assuming that the initiation and elimination of a county grocery tax is exogenous, the results seem to indicate that the proposed grocery tax could exacerbate food insecurity by 1 to 5 percentage points. It is shown that for low-income households, the probability of becoming food insecure would increase by 84 percent.