A report released earlier this month by the Oklahoma Policy Institute offers policymakers in the Sooner State several ideas for negotiating one of the fundamental tensions in state fiscal policy: the inclusion of groceries in a state's sales tax base. On the one hand, including groceries in the base is consistent with the notion that the base for any tax should be as broad as possible. Including groceries in the sales tax base also generates considerable revenue -- in Oklahoma, doing so yielded over $300 million in 2007. On the other hand, taxing groceries is highly regressive. The poorest twenty percent of Oklahomans paid two and a half times as much in grocery taxes, relative to their incomes, as middle income taxpayers in 2007.
Rather than removing groceries from the sales tax base altogether, OK Policy observes that policymakers could expand the state's existing "grocery tax credit," either by raising the value of the credit itself or extending it to additional taxpayers. Such a change would be in line with the recommendations of last year's Oklahoma Task Force on Hunger. To see more of the Oklahoma Policy Institute's work, visit www.okpolicy.org.