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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 9/10 of 1% of your grocery bill?...
Ooooh, Whoop-tee-doo, Governor
(Revised Mar 13, 2008)

Updated for a family of eight, with each individual receiving a $30 per person food tax refund in 2008, up to a maximum $100 per person refund in 2015.  No big difference from a standard family of four since the grocery bill doubles, inflation still increases at 10% per year, and while your food bill jumps from $31,200 in 2008 to $60,800 in 2015, the state takes $3,442 in food taxes and gives you back only $800, less than 1/4 of the 6% sales tax.

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 per person 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 per person increase in grocery tax refund each year thereafter until it hits a whopping $100 per person 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 eight in Idaho (updated from a family of four as per a suggestion by Rep. Ruchti), e.g. the Jones Family, will typically spend about $600 per week for groceries in 2008.  $600 per week times 52 weeks per year equals $31,200.  The current sales tax on food is 6% and, in this example, is already included in the $31,200.  Therefore, the Joneses will spend $29,432 for groceries and $1,768 in sales tax for those groceries, which equals $31,200.

   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 increase per person over the next 8 years:

The Big Picture – Food Costs and Inflation

Year

Family of 8 Annual Food cost $

6% sales Tax included $

10% annual price inflation $

Food Tax Refund $

Net Annual Food cost $

2008

31,200

1,768

 

240

30,960

2009

34,320

1,943

3,120

320

34,000

2010

37,752

2,137

3,432

400

37,352

2011

41,527

2,351

3,775

480

41,047

2012

45,680

2,586

4,153

560

45,120

2013

50,248

2,844

4,568

640

49,608

2014

55,273

3,129

5,025

720

54,553

2015

60,800

3,442

5,527

800

60,000

Total

356,800

20,200

29,600

4,160

352,640

   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 $31,200 to $60,800.  The Jones’ 6% constant sales tax on food compounds with the 10% annual price inflation.  Thus, Idaho’s sales tax on food doubles, from $1,768 in 2008 to $3,442 in 2015.  This is the power of compounded inflation.  It tends to increase exponentially.  Meanwhile, most individual’s 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 $80 per year, while the inflationary cost for food increases exponentially by thousands of dollars annually.  In 2009, you pay an extra $3,120 for food and the state gives you an extra $80 rebate.  In 2010, you pay an extra $3,432 and the state gives you back an extra $80.  Finally, in year 2015, you pay an extra $5,527 and the state gives you back an extra $80.  Your food costs increase by thousands of dollars per year due to inflation, yet the state only refunds a flat $80 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 8 Annual Food cost $

Annual 10% food price inflation

Annual food tax refund increase

Net Annual Food cost increase

2008

31,200

 

 

 

2009

34,320

3,120

80

3,040

2010

37,752

3,432

80

3,352

2011

41,527

3,775

80

3,695

2012

45,680

4,153

80

4,073

2013

50,248

4,568

80

4,488

2014

55,273

5,025

80

4,945

2015

60,800

5,527

80

5,447

Total

356,800

29,600

560

29,040

   In short, your inflated grocery costs (including sales taxes) will jump by $29,600 from 2008 to 2015 while Idaho politicians want to give you a food tax refund increase of $560.  This means that your Idaho grocery tax rebate is equal to about 9/10 of 1% of your total grocery bill.  Put another way, your 6% food tax in 2015 will equal $3,442 and the Idaho Legies want to refund only $800 -- which is less than 1/4 of the 6% sales tax on food.  The state takes $3,400 and gives you back $800; what a deal.  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 $80 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 annual food costs jump from $31,200 in 2008 to $60,800 in 2015 and you want to refund $800 to me?

   Politicians simply add up all the $100 per person 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 a $10 increase 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.  $240 bucks isn’t enough to go to two movies per year and buy popcorn for a family of eight, 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 person 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 to spend $3 million 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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