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Idaho's Weekly Journal of Local & National Commentary  Week 3814

 

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by Free Market Duck

Idaho Grocery Tax Rebate to equal 3/10 of 1% of your grocery bill?...
Ooooh, Whoop-tee-doo, Governor
(Mar 3, 2008)

Boise, ID – Whoaa, pardner.  Hit the brakes.  Governor Butch Otter and the Idaho state legies are playing math games with you again.  Take their ridiculous proposal to give you a paltry $30 tax refund on groceries in 2008.  It stinks.  But wait, that’s not all, girl friends.  They also want to give you a flat $10 increase in grocery tax refund each year thereafter until it hits a whopping $100 total food tax rebate, which, for all you math whizzes out there, will occur in The Year of The Worthless Dollar:  2015.  A $30 rebate in 2008, $40 in 2009, $50 in 2010… $100 in 2015.  Not exactly your Fibonacci math series.

   Sounds good, huh?  Not so fast, cowboy.  Let’s look at the real math in The Big Picture, shall we?

   Assumption:  A standard family of four in Idaho, e.g. the Jones Family, will typically spend about $300 per week for groceries in 2008.  $300 per week times 52 weeks per year equals $15,600.  The current sales tax on food is 6% and, in this example, is already included in the $15,600.  Therefore, the Joneses will spend $14,716 for groceries and $884 in sales tax for those groceries, which equals $15,600.

   The government’s official Consumer Price Index (CPI) is 2.4% and cleverly OMITS core costs for energy, housing, and food.  Ain’t that convenient for the Federal Reserve.  Adding these costs back in, the real rate of price inflation is between 10% - 15%.  Don’t believe me?  Ask the Arabs.  That’s why they get 14% for bailing out major Wall Street investment banks with $100 billion in Sovereign Wealth Funds.  Taking real inflation into consideration, let’s take another look at the Jones’ future annual food costs and the Idaho Legislature’s ridiculous $10 flat tax rebate over the next 8 years:

The Big Picture – Food Costs and Inflation

Year

Family of 4 Annual Food cost $

6% sales Tax included $

10% annual price inflation $

Food Tax Refund $

Net Annual Food cost $

2008

15,600

884

 

30

15,570

2009

17,160

971

1,560

40

17,120

2010

18,876

1,068

1,716

50

18,826

2011

20,763

1,175

1,888

60

20,703

2012

22,840

1,293

2,076

70

22,770

2013

25,124

1,422

2,284

80

25,044

2014

27,636

1,564

2,764

90

27,546

2015

30,400

1,721

3,040

100

30,300

Total

178,399

10,098

15,328

520

177,879


   The first thing one notices in the above table is how fast a 10% per year compounded price inflation escalates the Jones’ annual food costs.  In 8 years, the Jones’ food bill will double from $15,000 to $30,000.  The Jones’ 6% constant sales tax on food compounds with the 10% annual price inflation.  Thus, Idaho’s sales tax on food doubles, from $884 in 2008 to $1,721 in 2015.  This is the power of compounded inflation.  It tends to increase exponentially.  Meanwhile, most individuals' wages do not increase with inflation.

   The fundamental problem, of course, is that the government thinks it can print its way to prosperity with a paper money printing press.  That’s what they learned at Harvard and Berkeley.  Now they’re in charge of the Federal Reserve.

   Back to the scene of the food fight.

   The second thing one notices in the above table is that the Jones’ tax rebate increases are flat at $10 per year, while the inflationary cost for food increases exponentially by thousands of dollars annually.  In 2009, you pay an extra $1,560 for food and the state gives you an extra $10 rebate.  In 2010, you pay an extra $1,716 and the state gives you back an extra $10.  Finally, in year 2015, you pay an extra $3,040 and the state gives you back an extra $10.  Your food costs increase by thousands of dollars per year due to inflation, yet the state only refunds a flat $10 extra per year.  The food tax rebate is not indexed to inflation.  In table form, it looks like this:

The Big Picture – Rate of Increase Comparison

Year

Family of 4 Annual Food cost $

Annual 10% food price inflation

Annual food tax refund increase

Net annual food cost increase

2008

15,600

 

 

 

2009

17,160

1,560

10

1,550

2010

18,876

1,716

10

1,706

2011

20,763

1,888

10

1,878

2012

22,840

2,076

10

2,066

2013

25,124

2,284

10

2,274

2014

27,636

2,764

10

2,754

2015

30,400

3,040

10

3,030

Total

178,399

15,328

70

15,258

   In short, your inflated grocery costs (including sales taxes) will jump by $15,328 from 2008 to 2015 while Idaho politicians want to give you a food tax refund increase of $70.  This means that your Idaho grocery tax rebate is equal to about 3/10 of 1% of your total grocery bill.  Ooooh, whoop-tee-doo, Governor.

   It is absolutely absurd and insulting to all Idaho citizens for their Governor and state legislators to throw the people a peanut increase worth $10 per year when their grocery costs are increasing at thousands of dollars per year.

   How can our politicians be so insulting?

   One of the major reasons is that politicians tend to look only at the high level overview of budget dollars and not the details or what it really means at the individual level.  For example, Rep. Cliff Bayer, R-Boise, who sponsored the above food tax rebate bill, said the plan will cost $24 million the first year and $122 million when every Idahoan gets a $100 rebate in 2015.  Whoop-tee-doo, Rep. Bayer Aspirin – I’m getting a headache just thinking about it.  My food costs jump from $15,000 to $30,000 per year and you want to drop a Franklin C-Note on me?

   Politicians simply add up all the $10 rebates, multiply it by 1,000,000 or so, and end up with a total glob of millions of dollars.  They quickly forget during all the wrangling over your tax dollars that throwing you a peanut worth ten bucks per year won’t buy diddily-squat at the local grocery store.  In fact, politicians even tend to talk to us like we’re one huge collective flock of sheep, “Yo, people, we just saved you $122 million with a food tax rebate,” as if we all live in the same household and shop together at Costco with one huge freight train.  “Load ‘er up, boys.  That’s $5 million bucks for 2,000,000 lbs of hamburgers and 5,000,000 cases of Bud Lite.”  Give me a break.  $30 bucks isn’t enough to go to the movies and buy popcorn for a family of four, hold the fake butter and salt.

   Also, notice that Rep. Bayer refers to YOUR tax refund as a “cost” to the state, implying that the money automatically belongs to the state of Idaho and that, through the goodness of the Legislature’s heart, they will give it back to you, as if it was their money to begin with.  Tax rebates are not “costs” to the state.  Taxes are YOUR MONEY, not THE POLITICIANS’ MONEY TO SPEND ON FUTURE COSTS THEY WOULD LIKE TO INCUR FOR THEIR UNCLE BILLY-BOB’S FAVORITE PROJECTS.

   Our suggestion:  Cut the sales tax on ALL food AND medical in Idaho and stop fooling around with stupid-ass $10 per year rebate jokes for groceries.  It’s the spending, you guys, it’s the spending, and we’re in the middle of a Recession.  We don’t need to spend more on new prisons for victimless drug crimes (85% of Idaho’s prison population are there for non-violent, victimless crimes, minor dope possession); we don’t need millions for a Special Olympics; we don’t need a Government Detox Center for drunks; and we certainly don’t need a $20 million East Park Center Bridge to Nowhere since nobody in their right mind is going to take out a construction loan for Harris Ranch to build a thousand homes across the Boise River during America’s biggest housing Depression since the 1930s.  Either cut the sales tax on food, ALL of it, or you can keep the damn $10. – FM Duck

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