Association for Public Policy Analysis & Management

The health behavior literature in Economics has documented in-depth the impacts of taxes on sugar-sweetened or fatty foods, but the empirical literature on grocery taxes is less complete. A tax on grocery foods is considered a regressive tax because of the disproportionate impact it has on low-income households and their ability to purchase food, potentially forcing households to buy fewer or lower-quality groceries. This paper examines the relationship between state-level taxes on foods for consumption at home (grocery foods) and food security. The case for a tax on food relies on the theoretical inelastic nature of staple foods—if the price increases, most households will not purchase significantly less food, so the tax will raise more revenue than a similar tax on a price-elastic good. Thus, a tax on grocery foods is therefore especially attractive for states with budget and revenue crises, like New Mexico. We use the variation in independently collected state-level food taxes for forty-six states over a seventeen-year period to estimate the effect on food security from the U.S. Census Bureau’s Current Population Survey Food Security Supplement. We also examine how these effects vary for households of different demographic and socioeconomic groups. The policy significance of this estimation is far-reaching, with implications not only for state-level food taxes but also for local tax policy.