Idaho's Grocery Tax

Two Models, No Comparison

In 1947, four states adopted sales taxes simultaneously: Connecticut, Maryland, and Rhode Island in the Northeast, and Tennessee in the South. Every northeastern state exempted food. Tennessee taxed it. The regional divide was absolute—not a tendency, but a perfect predictor. No northeastern state taxed food; no southern state exempted it. The same postwar fiscal pressure, the same year, opposite design choices.

This was the crystallization of two templates developed over the previous decade: California's 1933 model, which exempted necessities including food, and Mississippi's 1930 model, which taxed everything for maximum revenue. States learned from regional neighbors, not from national analysis. Connecticut looked at New York and New England. Tennessee looked at Mississippi and the South. The design choice traveled through geography, not deliberation.

No institution made the divergence visible. The Council of State Governments reactively distributed what states had already done rather than analyzing comparative approaches. The Federation of Tax Administrators focused on administrative coordination, not policy design. The National Tax Association published annual proceedings but didn't compile systematic comparisons of base definitions. States inherited templates without knowing there was anything to inherit.

The International Parallel That America Missed

On April 23, 1940, Britain's Chancellor of the Exchequer introduced the Purchase Tax to Parliament with an explicit rationale for food exemption: the tax must not interfere with maintaining adequate food supplies or keeping prices moderate for working households. Food represented nearly half of all retail consumption; the government deliberately excluded it. The exemption was foundational to the tax's political legitimacy.

Fourteen years later, France enacted the world's first modern value-added tax using reduced rates for food products rather than full exemption. Both European systems embedded the same premise: consumption taxes must not unduly burden necessities. The UK approach was categorical; the French was proportional. But both were designed with social welfare considerations that American state sales taxes largely ignored.

None of this reached American policymakers. When Idaho adopted its sales tax in 1965, European experience with food-protective consumption taxes was twenty-five years old. It might as well not have existed.

Academics Proved It, But No One Told the States

Treasury Secretary Henry Morgenthau Jr. testified before Congress in 1942 that the sales tax was regressive and encroached harmfully on living standards. Harold Groves was treating consumption tax regressivity as established academic fact by 1944. Carl Shoup—who had led Treasury's six-volume study of American taxation in the 1930s—spent 1949 and 1950 redesigning Japan's postwar tax system with progressive principles that explicitly protected necessities. By 1959, Richard Musgrave published the foundational synthesis of public finance theory.

The lag between this academic consensus and state policy action lasted thirty-two years—from Morgenthau's 1942 testimony to Iowa's first food exemption in 1974. Shoup's professional networks ran through federal agencies and international organizations; state tax commissions operated in a separate world of regional conferences. The knowledge didn't fail to reach state capitols because it was wrong. It failed because the institutional channels didn't exist. Not bad ideas. Broken plumbing.

Forty Years Without a Question

Between 1934 and 1974, no food-taxing state reversed course. The more revealing finding is that no state appears to have seriously tried. Searches of legislative records for large food-taxing states return no food exemption proposals from 1940 to 1970. No newspaper campaigns, no organized consumer advocacy, no legislative hearings. The silence was uniform and cross-regional.

The standard story of policy lock-in involves organized defenders—lobbying, legislative maneuvering. That story means the issue is at least contested. What the evidence suggests instead is deeper: a policy choice so embedded that it fell entirely off the agenda. No one proposed food exemption because no one remembered there had ever been a choice. Revenue dependency played a role—food represented roughly a fifth of household spending, generating significant revenue—but low tax rates also kept the burden invisible. Political mobilization requires visible grievance. When the burden is invisible, the question doesn't arise.

The question finally arose when food price inflation in 1973 and 1974 made it suddenly visible. Iowa exempted food on July 1, 1974. Michigan voters approved a constitutional amendment the same year. Washington followed in 1977. Forty years of silence ended within eighteen months of a single external shock.

Idaho's Long Holdout: Property, Not Groceries

While other states locked in food taxation through adoption, Idaho was locked out of sales tax adoption entirely for twenty-eight years—through a different mechanism. Idaho's 1931 Property Tax Relief Act had explicitly tied the new income tax to reducing property levies. This created the template that governed every subsequent revenue discussion: new taxes exist to provide property tax relief, not to expand the revenue base.

Idaho's 1935 sales tax was repealed in 1937 as unpopular, then decisively rejected in a 1936 referendum. Governor Robert Smylie finally succeeded in 1965 by restructuring the deal: House Bill 222 prohibited a property tax levy for state purposes while the sales tax remained in effect and delivered twenty-six million dollars in immediate property and income tax relief. The grocery tax was never debated. The negotiation was entirely about property taxes. Food was included in the base because that was the template late-adopting states used—and no one in Idaho had information suggesting an alternative existed.

The Fork No One Saw

The invisible divergence of 1938 to 1959 created the conditions that defined Idaho's 1965 decision. No institution had compiled the interstate comparison. Academic journals contained the equity analysis, but state legislators didn't read them. European models demonstrated the alternatives, but American officials didn't study them. Regional networks transmitted templates without questioning them.

By the time Idaho's policymakers gathered to debate House Bill 222, the fork in the road had become a single path. The grocery tax wasn't chosen. It was inherited—from a regional template that had itself been inherited, from a design choice made without deliberation, in a landscape where the alternative had never been visible. The pattern Idaho inherited in 1965 is still operating today: states that taxed food in 1947 are mostly still taxing it, and the switching costs that were invisible then have compounded into the fiscal and political obstacles that define the contemporary reform debate.