Idaho's Grocery Tax

A seven-month governor seizes the moment

Jim Risch became Idaho's 31st governor by accident. When President Bush nominated Governor Dirk Kempthorne as Interior Secretary in March 2006, Lieutenant Governor Risch inherited both the office and a political crisis.georgewbush-whitehouse.archives.govWhite House ArchivesKempthorne Nomination AnnouncementMarch 2006 nomination of Idaho Governor Kempthorne as Interior Secretary→ georgewbush-whitehouse.archives.gov[1] Idaho property values had surged significantly statewide from 2004–05 to 2005–06, with some districts seeing increases exceeding 27%.idahoednews.orgIdaho Education NewsTen Years Later: Tax Shift Still Divides Idaho LeadersComprehensive 2016 retrospective on the Risch property tax shift→ idahoednews.org[2] In Senator Shawn Keough's Lake Pend Oreille district, a 2005 public hearing on property taxes grew so heated she reportedly had to use her shoe as a gavel to control the crowd. "The little button on the top of the pressure cooker was up," future governor Brad Little recalled in 2016. "We were going to have a property tax revolt."idahoednews.orgIdaho Education NewsTax Shift Still Divides Idaho LeadersBrad Little "pressure cooker" quote about property tax crisis→ idahoednews.org[2]

Risch had the credentials to act. A millionaire trial attorney and former Senate Majority Leader, he understood Idaho's tax architecture intimately.en.wikipedia.orgWikipediaJim RischBiographical and career data for Idaho senator and former governor→ en.wikipedia.org[3] More importantly, he had what Kempthorne lacked: political will and only seven months to establish a legacy. "I had always felt the wrath of the Idaho taxpayer against property taxes," Risch said in a 2016 interview. "People hate the property tax."idahoednews.orgIdaho Education NewsTax Shift Still Divides Idaho LeadersRisch quote about public anger toward property taxes→ idahoednews.org[2]

On July 25, 2006, Risch called a special legislative session for August 25. His proclamation declared that "rising property taxes are a major concern" and that "the issues of property tax relief and safeguarding public education constitute an extraordinary occasion." But unlike a regular session where alternatives could be debated and amended, Risch restricted the special session to a single bill: RS 16445, which would become House Bill 1.legislature.idaho.govIdaho LegislatureHB 1 — First Extraordinary Session 2006Full bill text of Property Tax Relief Act of 2006→ legislature.idaho.gov[4]

Legislative leaders aligned quickly. Risch held pre-session meetings with individual legislators to secure votes, making clear the bill would not be amended. When Rob Winslow of the Idaho Association of School Administrators assembled a delegation of superintendents to meet with the governor, they found Risch "emphatic" that his mind was made up. Winslow later recalled bitterly: "At least he could have said, 'Hi,' or, 'Thanks for coming.'"idahoednews.orgIdaho Education NewsTax Shift Still Divides Idaho LeadersWinslow quote about Risch refusing to hear superintendents→ idahoednews.org[2]

Fifteen hours to restructure $260 million

The August 25, 2006 special session began at 8:00 AM and ended at 11:16 PM — fifteen hours and sixteen minutes to fundamentally restructure how Idaho funds public schools. House Bill 1, titled the "Property Tax Relief Act of 2006," eliminated the school maintenance and operations (M&O) property tax levy worth $260 million annually, raised the state sales tax from 5% to 6% to generate an estimated $210 million in new revenue, and placed $100 million into a new Public Education Stabilization Fund.legislature.idaho.govIdaho LegislatureHB 1 — Property Tax Relief Act of 2006Bill text: eliminates M&O levy, raises sales tax, creates stabilization fund→ legislature.idaho.gov[4] The math started roughly "$50 million upside down" — $260 million in cuts funded by only $210 million in new revenue.idahoednews.orgIdaho Education NewsTax Shift of 2006 Adds Up to Tax IncreaseDetailed quantitative 10-year analysis of the Risch shift→ idahoednews.org[5]

The distribution of benefits revealed the true structure of the deal. Approximately 60% of the property tax relief went to businesses, farms, utilities, and commercial property — roughly $156 million annually. Only 40% went to residential property owners — about $104 million.en.wikipedia.orgWikipediaIdaho Property Tax Relief Act of 2006Confirms 60/40 business/residential split of tax relief→ en.wikipedia.org[6] Democrats proposed an alternative using the state's surplus to eliminate school levies only for homeowners, not businesses, but Risch refused to allow consideration.idahoednews.orgIdaho Education NewsTax Shift Still Divides Idaho LeadersDemocrats' homeowner-only alternative proposal rejected→ idahoednews.org[2] One analysis estimated that most Idaho families would see a net tax increase under Risch's plan, with only families earning above approximately $135,000 seeing net decreases on average.spokesman.comSpokesman-ReviewRisch Would Up Sales Tax to Lower Property TaxesIdaho Center on Budget and Tax Policy distributional analysis→ spokesman.com[7]

House Republicans controlled the agenda tightly. The Revenue and Taxation Committee reported the bill favorably by a 13-6 vote. The House passed HB 1 by 47-23, with ten Republicans joining all but one Democrat in opposition.legislature.idaho.govIdaho LegislatureHB 1 Vote RecordsCommittee and floor vote records for the special session→ legislature.idaho.gov[4] In the Senate, Democrats forced clerks to read the entire 29-page bill aloud as a protest against the rushed process, delaying floor debate until approximately 8:30 PM. The Senate ultimately passed the measure 24-11.idahoednews.orgIdaho Education NewsTax Shift Still Divides Idaho LeadersAccount of Senate protest and full bill reading→ idahoednews.org[2] Governor Risch signed HB 1 on August 31, 2006.

The ballot question that concealed the trade

House Bill 1 required an advisory vote in November 2006, placing this question before Idaho voters: "Should the state of Idaho keep the property tax relief adopted in August 2006, reducing property taxes by approximately $260 million and protecting funding for public schools by keeping the sales tax at 6 percent?"sos.idaho.govIdaho Secretary of State2006 Voters' PamphletOfficial ballot language for advisory question on property tax shift→ sos.idaho.gov[8]

The ballot language disclosed that the sales tax would be "kept at 6%" but concealed that this represented a 20% increase from the previous 5% rate. It emphasized $260 million in property tax reduction but made no mention of the $210 million cost to consumers. It framed the question as "keeping" something already adopted rather than presenting voters with a genuine policy choice. The word "groceries" appeared nowhere on the ballot, even though Idaho was one of only a handful of states that taxed food at the full sales tax rate.

The framing represented a dramatic shift from the original legislative proposal. Senate Bill 1502, introduced in April 2006, had asked a neutral question: "Shall the three-tenths of one percent property tax contained in Section 33-802, Idaho Code, and levied against the market value of taxable property in the school district for maintenance and operation purposes of school districts be removed and the funds be replaced by a sufficient increase in the state sales tax?"legislature.idaho.govIdaho LegislatureSenate Bill 1502 — Regular 2006 SessionOriginal neutral ballot language asking whether to "remove" and "replace"→ legislature.idaho.gov[9] That language asked whether to "remove" property tax and "replace" it with a sales tax increase. The final ballot language was rewritten to ask whether to "keep" property tax relief and "protect" school funding — transforming a choice into an affirmation.

Voters approved the measure overwhelmingly: 72% yes, 28% no — approximately 309,000 votes to 118,000. It reportedly passed in every legislative district statewide.idahoednews.orgIdaho Education NewsTax Shift Still Divides Idaho Leaders72% approval margin and statewide passage→ idahoednews.org[2] The "Committee for Fairness in Idaho Tax Policy PAC" raised $34,000 to support the measure, with contributions from JR Simplot Co., Idaho Power, Idaho Association of Realtors, Union Pacific Railroad, and Brad Little's senate campaign. No organized opposition campaign existed.ballotpedia.orgBallotpediaIdaho Property Tax Relief, HB 1 (2006)Campaign finance data and PAC contributors→ ballotpedia.org[10]

Senator Risch frequently cited the 72% approval as vindication. When he called Kevin Richert, then editorial page editor of the Idaho Statesman, in 2016 to discuss a critical retrospective analysis, Risch said: "You editorial writers may not have wanted it, but apparently the people did."idahoednews.orgIdaho Education NewsTaking a Deep Dive into the 2006 Tax ShiftRichert's retrospective including direct Risch phone call→ idahoednews.org[11]

But what did voters understand? The ballot told them property taxes would decrease by $260 million and schools would be "protected." It did not tell them that the sales tax was increasing 20%, that 60% of property tax relief went to businesses, that the new sales tax applied to groceries with no additional relief, that the measure was already enacted and the vote was merely advisory, or that frozen grocery tax credits of $20 per person would cover less than a quarter of a typical family's grocery tax burden.cbpp.orgCenter on Budget and Policy PrioritiesIdaho Is the Only State to Exclude Low-Income FamiliesCredit inadequacy and low-income exclusion analysis→ cbpp.org[12] On the same November 2006 ballot, an Idaho Education Association initiative to dedicate one cent of sales tax to schools while keeping property tax levies intact failed with only 45% support — suggesting voters preferred the "relief" framing over the "investment" framing.idahoednews.orgIdaho Education NewsTax Shift Still Divides Idaho LeadersIEA initiative failure at 45% on the same ballot→ idahoednews.org[2]

How the shift dismantled school funding equity

Before 2006, Idaho schools relied on a combination of state general fund support and local M&O property tax levies. The M&O levy system was equalized — the state funding formula distributed more general fund revenue to districts with less property wealth, ensuring that a child's educational resources did not depend entirely on local property values.idahoednews.orgIdaho Education NewsTax Shift of 2006 Adds Up to Tax IncreaseDescribes equalization mechanism in pre-2006 M&O levy system→ idahoednews.org[5] Districts could seek voter-approved supplemental levies for enrichment beyond the basic formula, but in 2006–07, only 59 of Idaho's 115 school districts did so, collecting $79.1 million total.idahoednews.orgIdaho Education NewsTax Shift Adds Up to Tax Increase59 districts with supplementals collecting $79M pre-shift→ idahoednews.org[5]

The Risch shift eliminated the M&O levy entirely, replacing it with a permanent 6% sales tax. Crucially, the supplemental levies that subsequently exploded to fill funding gaps remained entirely unequalized — districts had to pass and retain what they could locally, with no state adjustment for property wealth disparities.idahoednews.orgIdaho Education NewsTax Shift Adds Up to Tax IncreaseSupplemental levies unequalized — "districts are on their own"→ idahoednews.org[5] This created a two-tiered funding system: state dollars distributed by formula, and local supplemental dollars dependent entirely on district property wealth and voter willingness to tax themselves.

Representative John Rusche, who voted against HB 1, later explained as House Minority Leader: "Eliminating $260 million in local property tax levies placed a heavy burden on poorer districts that cannot — or will not — go to voters to seek supplemental levies." Senator Shawn Keough, who voted for the measure, saw voter control as a feature: "House Bill 1 took $260 million in school property taxes off autopilot… Property taxpayers will vote to tax themselves if they think it has merit."idahoednews.orgIdaho Education NewsTax Shift Still Divides Idaho LeadersRusche and Keough quotes on school funding impact→ idahoednews.org[2]

The supplemental levy boomerang

Property owners expected relief. Instead, many got a bait-and-switch. In the fifteen years leading up to the Risch shift, Idaho school districts collected an average of approximately $57.9 million annually in supplemental property tax levies. In the years following, that annual average more than doubled to roughly $136.6 million.idahoednews.orgIdaho Education NewsTax Shift Adds Up to Tax IncreaseSupplemental levy data showing dramatic increase post-shift→ idahoednews.org[5]

The explosion accelerated during the Great Recession. By 2015–16, 94 districts had supplemental levies totaling $186.6 million — more than double the $79 million collected a decade earlier.idahoednews.orgIdaho Education NewsTax Shift Adds Up to Tax Increase94 districts with $186.6M in supplemental levies by 2015-16→ idahoednews.org[5] Idaho Education News conducted a comprehensive 10-year analysis in 2016, calculating the net tax impact by 2015–16: property tax relief of $303.1 million (adjusted for property value growth) against costs of $217.2 million in sales tax increases and $107.6 million in supplemental levy growth — a total cost to taxpayers of $324.8 million. The net result: a $21.7 million tax increase.spokesman.comSpokesman-ReviewTax Shift Has Resulted in Overall Tax Increase of $21.7 MillionIndependent confirmation of Idaho Education News arithmetic→ spokesman.com[13]

The distribution of winners and losers defied the promised structure. By 2015–16, 26 districts were collecting more in local property taxes than before the shift, while 18 districts received fewer total state and local dollars than they had a decade earlier. Almost all the 18 "loser" districts were small and rural, with 13 adopting four-day school weeks to cut costs.idahoednews.orgIdaho Education NewsTax Shift Adds Up to Tax IncreaseDistrict-level winners and losers, four-day school weeks→ idahoednews.org[5] Kuna School District Superintendent Wendy Johnson described the shift: "So much of my work has been turned toward funding. It became a part of what we had to do."idahoednews.orgIdaho Education NewsTax Shift Still Divides Idaho LeadersJohnson quote on administrative burden of levy campaigns→ idahoednews.org[2]

The frozen credit at 6%

The sales tax increase from 5% to 6% represented a 20% increase in the tax burden on all purchases, including groceries. Idaho's grocery tax credit remained frozen at the levels set in 2001: $20 per person under age 65 and $35 per person age 65 and older.cbpp.orgCenter on Budget and Policy PrioritiesIdaho Is the Only State to Exclude Low-Income FamiliesCredit amounts: $20 under 65, $35 age 65+→ cbpp.org[12] These amounts did not increase as part of HB 1, even though the sales tax rate jumped 20%.

Consider a family of four with estimated grocery spending of $6,000–7,000 annually: at the new 6% rate, they would owe roughly $360–420 in grocery sales tax while receiving only $80 in credits, covering roughly 19–23% of the burden. For a single person under 65, the $20 credit covered an estimated 5–6% of annual grocery tax. The 20% rate increase created an additional $60–70 per year burden on families that the frozen credit did not address.

Idaho was — and remains — the only state in America to exclude low-income families from its grocery tax credit. Families earning below the filing threshold ($17,500 for married couples, $8,750 for singles in 2007) were ineligible for the credit unless over age 62, blind, or disabled veterans. Over 14,000 married Idaho households with at least one working member had income under $17,500 in 2006, and 70% of those families included working members.cbpp.orgCenter on Budget and Policy PrioritiesIdaho Is the Only State to Exclude Low-Income FamiliesFiling threshold exclusion and 14,000+ affected households→ cbpp.org[12] These working poor families received no offset whatsoever for the 20% grocery tax increase. They simply paid more.

Senator Clifford Bayer tried to address this during the special session, raising concerns about the sales tax increase's impact on low-income families and proposing to increase the grocery tax credit. But the one-day timeline and Risch's insistence on a simple, unamended bill meant Bayer's concerns went nowhere.idahoednews.orgIdaho Education NewsTax Shift Still Divides Idaho LeadersBayer's failed attempt to increase the grocery credit→ idahoednews.org[2]

Idaho as national outlier

The 2006 tax shift made Idaho an extreme outlier in the national grocery tax landscape. By 2006, 31 states plus the District of Columbia exempted groceries entirely from state sales taxes. Seven additional states taxed groceries at reduced rates.cbpp.orgCenter on Budget and Policy PrioritiesStates That Still Impose Sales Taxes on Groceries2007 report: 31 states + DC exempt food entirely→ cbpp.org[14] Only Alabama, Mississippi, and South Dakota taxed groceries at full rates without meaningful relief. Idaho, at 6% with a frozen $20 credit, was joining their company.

The national trend during 2000–2007 moved decisively toward exemption or reduction. Louisiana, North Carolina, and South Carolina all eliminated or dramatically reduced grocery taxes during the early 2000s. Wyoming temporarily suspended its 4% grocery tax in 2006 using a billion-dollar budget surplus. Utah and South Carolina cut grocery sales tax rates in 2006. Arkansas reduced its grocery tax from 6% to 3% in July 2007.cbpp.orgCenter on Budget and Policy PrioritiesStates That Still Impose Sales Taxes on GroceriesState-by-state grocery tax reform movements 2000-2007→ cbpp.org[14]

Among Idaho's neighbors, the contrast was stark. Montana and Oregon had no sales tax at all. Wyoming suspended its grocery tax. Utah reduced its rate. Colorado and Washington fully exempted groceries. Idaho stood alone in the Intermountain West in maintaining — and raising — a high grocery tax rate.

The structural echo no one recognized

The 2006 Risch shift replicated the 1965 Smylie architecture almost precisely. In 1965, Governor Robert E. Smylie reduced property and income taxes by $26 million and implemented Idaho's first 3% sales tax, explicitly dedicated to public schools. Voters approved 61% in a 1966 referendum. In 2006, Governor Jim Risch reduced property taxes by $260 million and increased the sales tax to 6%, explicitly framed as "protecting funding for public schools." Voters approved 72%. Both shifts used the same political architecture: property tax relief as the visible benefit, sales tax increases including on groceries as the hidden cost, education funding as the justification, broad public approval providing democratic legitimacy, and deepened structural dependency on regressive grocery tax revenue as the long-term consequence.

Yet no evidence exists that anyone explicitly recognized this parallel in 2006. Searches of legislative debate records, editorial coverage, academic commentary, and policy analyses from that year found no contemporaneous observers drawing the connection between the 1965 and 2006 shifts.idahoednews.orgIdaho Education NewsTaking a Deep Dive into the 2006 Tax ShiftRichert's retrospective — no evidence of 1965 parallel recognition→ idahoednews.org[11] Kevin Richert, then editorial page editor of the Idaho Statesman, confirmed that the editorial board opposed HB 1 but gave no indication of recognizing the historical echo.

The most striking irony: Steve Smylie, son of Governor Robert E. Smylie and a sitting state representative in 2006, voted against House Bill 1 as one of his final acts in the legislature.idahoednews.orgIdaho Education NewsTax Shift Adds Up to Tax IncreaseSteve Smylie's vote against HB 1→ idahoednews.org[5] He understood the math was wrong — the proposal started roughly $50 million short. But there is no record of him warning colleagues that they were about to replicate his father's architecture at a higher level. In 2013, Steve Smylie wrote: "The money once guaranteed schools is now building prisons and giving tax refunds to whomever lobbies best in the legislature."idahoednews.orgIdaho Education NewsWe Solve Things by Working TogetherSteve Smylie op-ed on education funding failures→ idahoednews.org[15] Even then, seven years after the shift, he did not explicitly connect 2006 to his father's 1965 architecture.

The same structural policy move was made twice, 41 years apart, without recognition by legislators, the press, or even the son of the governor who created the original template. The architecture had become naturalized, invisible — a taken-for-granted way of "solving" school funding crises.

The education hostage and the tightened trap

Before 2006, Idaho's grocery tax existed for general revenue purposes. After 2006, it became directly tied to education funding through the permanent 6% sales tax designated to replace eliminated school M&O levies. This structural entanglement created a powerful new argument against reform: eliminating the grocery tax would "hurt schools."

The argument did not appear immediately but emerged as reform efforts gained traction. In 2017, the Idaho Legislature passed full grocery tax repeal with bipartisan support, but Governor Butch Otter vetoed the bill citing budget concerns.idahoednews.orgIdaho Education NewsWith Revenues Dwindling, Grocery Tax Repeal on Hold2017 legislative repeal and Otter veto→ idahoednews.org[16] The Idaho Center for Fiscal Policy calculated that if both the grocery sales tax and credit were eliminated, the net revenue loss would be approximately $56 million, with roughly $21.5 million from the public school share.idahofiscal.orgIdaho Center for Fiscal PolicyGrocery Tax Credit FAQsRevenue impact estimates for grocery tax elimination→ idahofiscal.org[17] Yet the political rhetoric inflated this to existential threat — because the Risch shift had wired schools directly into the sales tax revenue stream.

The structural hostage was complete. Attacking the grocery tax could now be framed as attacking schools — even though Idaho's Constitution requires "general, uniform and thorough" public schools but does not specify funding source,legislature.idaho.govIdaho LegislatureIdaho Constitution Article IX, Section 1Constitutional education mandate without specified funding source→ legislature.idaho.gov[18] even though 31 states fund excellent schools without taxing groceries, and even though the grocery tax is far more regressive than the property taxes it replaced.

The Risch shift did not hurt Jim Risch politically — it launched him to national office. The advisory vote passed with 72%, and Risch won re-election as Lieutenant Governor in November 2006. In 2008, he won an open U.S. Senate seat. He has been re-elected twice since.en.wikipedia.orgWikipediaJim RischRisch's post-2006 political career trajectory→ en.wikipedia.org[3] The political lesson was clear: property tax relief is enormously popular, voters will approve sales tax increases if framed as "protecting schools," and the long-term consequences will not be blamed on the politician who engineered the shift.

Others paid the price. School administrators spent the next decade running levy campaigns instead of focusing on student achievement. Eighteen of Idaho's 115 school districts collected fewer total state and local dollars by 2015–16 than they did before the shift. The first K-12 budget cuts in state history came during the Great Recession when sales tax revenue plummeted — precisely the volatility the M&O levy system had been designed to buffer against.idahoednews.orgIdaho Education NewsTax Shift Still Divides Idaho LeadersFirst K-12 budget cuts in state history during Great Recession→ idahoednews.org[2]

By 2006, Idaho had maneuvered itself into a position where eliminating the grocery tax could be framed as attacking education, where 60% of "property tax relief" had gone to businesses, where working poor families paid full grocery tax with no offset, and where Idaho stood as a national outlier raising grocery tax burdens while the rest of America moved toward zero. The credit was frozen at $20/$35, covering a shrinking fraction of the now-increased burden. Switching costs had escalated. Structural hostages had been created. And 72% voter approval provided democratic legitimacy that made reversal nearly impossible.

The same structural move that Governor Smylie made in 1965 — trading property tax relief for sales tax dependency, education as the justification — had been replicated at a higher level: higher rate, higher dollar amounts, deeper structural entanglement, and stronger democratic legitimacy. The trap had tightened to its maximum. And the reader who has followed each chapter now sees what no Idaho legislator in 2006 recognized: this was not a new solution to an old problem. It was the old solution, applied again, compounding the lock-in that would block reform for the next two decades.