Idaho's Grocery Tax
Penny for Benny: Idaho's Failed First Sales Tax and the Ghost It Left Behind
How a 2% grocery tax with no defenders collapsed in 18 months and haunted Idaho for three decades
Idaho's 1935 sales tax collapsed in 18 months not because voters opposed taxation, but because the design guaranteed no one would defend it. When every grocery purchase reminded voters of the burden and no organized group had received visible gains worth protecting, a brand-new referendum mechanism channeled that anger into rapid repeal. The same instrument, redesigned in 1965 with explicit credits, organized defenders, and built-in voter approval, survived and endured for six decades. Today, a 2026 initiative attempts to replicate the 1936 override—but against a lock-in the 1936 petitioners never faced. The mechanism is identical. The conditions are opposite.
A Tax With No One to Defend It
Charles Benjamin Ross—Idaho's first native-born governor, a sixth-grade dropout, and an ardent New Dealer—pushed the "Cooperative Emergency Revenue Act" through the 1935 legislature as part of a larger tax restructuring designed to shift burden off struggling farmers and toward retail transactions. The 2% sales tax on all purchases including groceries would, in theory, let the state "minimize the property tax." It was sound fiscal logic. It was catastrophic political design.
The problem was structural, not accidental. Property owners theoretically benefited when the sales tax shifted burden away from property levies—but the benefit was diffuse and invisible. No taxpayer received a notice reading "Your property tax fell by $X because of sales tax adoption." Gains that cannot be seen cannot be defended. Every new policy creates opponents at the moment it imposes costs. Whether it survives depends on whether the design simultaneously creates defenders. Ross's law created none. The concentrated pain was obvious—every grocery receipt, every shopping trip, every transaction. The diffuse gain was invisible. The political equation was lopsided from the first day of collections.
The Poem and the Referendum
Idaho voters had approved initiative and referendum powers in 1912, but the legislature blocked enabling procedures for 21 years. When lawmakers finally passed the enabling legislation in 1933, the 1935 sales tax became the first law ever challenged under Idaho's referendum power. This doubled the failure's significance: it wasn't just a tax that died, it was a proof of concept that direct democracy could override legislative taxation—and that the mechanism worked when burden was visible enough to motivate petition signatures and turnout.
The petition drive weaponized that visibility. At checkout counters across a Depression-scarred state, "Benny's penny" accumulated resentment with each transaction. The opposition campaign found its weapon in four lines: "Benny got our penny / Benny got our goat / We'll get our Benny / When we go to vote." The rhyme worked because it was emotionally accurate even where fiscally simplified. Ross did take pennies from struggling families. Voters did resent it. And they did get their Benny.
November 3, 1936: Three Contests, Two Defeats
The referendum landed on an already-crowded November 3 ballot—presidential election, gubernatorial race, and Ross's own Senate campaign against legendary incumbent William Borah. The convergence proved lethal. Voters rejected the sales tax 52.3% to 47.7%. Borah crushed Ross by roughly 27 percentage points for Senate—in a year when Franklin Roosevelt won a national landslide. FDR reportedly had no objection to Borah's reelection, withholding Democratic support from Ross. Montana Democrat Burton Wheeler openly backed Borah. And Ross's own party had grown hostile to what critics called his "domineering, Hitler-like attitude towards members of his own party."
The sales tax gave those opponents a concrete, everyday grievance that permeated the entire campaign—but it accelerated a political collapse already in motion. The Senate race demonstrated that the sales tax's damage wasn't confined to the referendum. It followed Ross wherever he ran.
The Repeal That Required No Fight
The referendum result was self-executing under Idaho's 1933 procedures: a "NO" vote automatically struck the legislative act. No governor had to sign a repeal bill. No new legislation was needed. The tax simply ceased. New Governor Barzilla Clark took office in January 1937 and never touched the issue—it was too toxic to approach. Ross tried one more comeback in 1938, won the Democratic primary, then lost the general to Republican C.A. Bottolfsen. He retired to his Parma ranch and, according to historian Malone, "continued to harbor hopes for a political rebirth until his death" in 1946. The sales tax had made rebirth impossible.
Why Some States Survived and Idaho Didn't
Idaho wasn't alone. Kentucky repealed a Depression-era sales tax in the same year as Idaho's referendum. Both adopted late enough that the fiscal emergency was easing when their referendum campaigns occurred. Meanwhile, 22 other states adopted sales taxes in the 1930s and kept them—Mississippi in 1932, California and Illinois in 1933. The difference wasn't public sentiment. It was duration. States that made it three to five years created irreversible dependencies: government budgets incorporated the revenue, administrative infrastructure employed staff, businesses invested in compliance systems, and defending constituencies crystallized. Idaho at 18 months was still reversible—no institutions had yet formed to resist reversal.
The 1943 episode confirmed how deeply the lesson had embedded itself. When Governor C.A. Bottolfsen proposed a 5% sales tax to fund a voter-approved senior pension program, the legislature chose to kill the pension rather than enact the tax. A benefit the public had explicitly voted for was sacrificed rather than accept a sales tax. Idaho returned to a no-sales-tax state and remained there until 1965.
The Ghost That Redesigned the Instrument
When Idaho finally tried again in 1965, every design choice bore the imprint of 1935's failure. The 1965 law included a $10 per person grocery credit—visible offsetting relief that property tax "minimization" had never provided. It enrolled Farm Bureau members and education advocates as organized defenders. It framed the tax around education funding—a permanent need, not a temporary emergency. And it built a voter referendum into the strategy rather than leaving itself vulnerable to one: when Idahoans voted in 1966, they approved the tax 61% to 39%, essentially the mirror image of the 1936 rejection.
The same instrument that failed in 18 months has now persisted for 60 years, because the 1965 designers studied 1935. They understood that simple adoption meant political death, and that survival required building defenders before the inevitable opposition organized. The grocery credit, born of that lesson, now stands as the defended institution that the 2026 initiative must overcome—where in 1936, petitioners faced no defense at all.