The Incidence of Grocery Taxes in U.S. Food and Factor Markets

38 Pages Posted: 24 Jul 2024

See all articles by Jason Zhao

Jason Zhao

Cornell University, Dyson School of Applied Economics and Management, Students

Christopher B. Barrett

Cornell University - Charles H. Dyson School of Applied Economics & Management

Harry M. Kaiser

Cornell University - School of Applied Economics and Management

Yuqing Zheng

University of Kentucky - College of Agriculture - Department of Agricultural Economics

Date Written: July 01, 2024

Abstract

We study the incidence of county-level grocery sales taxes across the United States from 2010-2019. We find substantial grocery tax over-shifting to consumers. On average, a grocery tax that generates $1 in government revenue leads to a $1.25 rise in tax-inclusive consumer food prices. This tax over-shifting is even higher for lower-income households and shoppers at discount and dollar stores. The grocery tax incidence varies significantly among foods, with over-shifting highest for perishable staples. The windfall revenue arising from grocery tax over-shifting does not translate into increased earnings for food retail workers nor higher prices received by farmers.

Keywords: Food Sales Taxes, Tax Incidence, Retail Food Prices, Demand Analysis JEL codes: H22, L81, Q11, D12

Suggested Citation

Zhao, Jason and Barrett, Christopher B. and Kaiser, Harry M. and Zheng, Yuqing, The Incidence of Grocery Taxes in U.S. Food and Factor Markets (July 01, 2024). Available at SSRN: https://ssrn.com/abstract=4899140 or http://dx.doi.org/10.2139/ssrn.4899140

Jason Zhao (Contact Author)

Cornell University, Dyson School of Applied Economics and Management, Students ( email )

Ithaca, NY
United States
6127075023 (Phone)

Christopher B. Barrett

Cornell University - Charles H. Dyson School of Applied Economics & Management ( email )

315 Warren Hall
Ithaca, NY 14853-7801
United States
607-255-4489 (Phone)
607-255-9984 (Fax)

HOME PAGE: http://aem.cornell.edu/faculty_sites/cbb2/

Harry M. Kaiser

Cornell University - School of Applied Economics and Management ( email )

248 Warren Hall
Ithaca, NY 14853
United States
607-255-1598 (Phone)
607-254-4335 (Fax)

Yuqing Zheng

University of Kentucky - College of Agriculture - Department of Agricultural Economics ( email )

Lexington, KY 40546
United States

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