LAUSR

Abstract In the United States, grocery tax policy varies at both state and county levels, with 16 states having grocery taxes in 2020. Several states are engaged in active debates about whether to remove or impose such taxes. Although the extant literature evaluates multiple factors that may contribute to food insecurity, little is known about the relationship between grocery food sales taxes and food insecurity. We present county-level panel data on grocery taxes from 2006 through 2017 and find that jurisdictions with grocery taxes are among the most food insecure in the country. The regressiveness of grocery taxes exacerbates food insecurity, at least in theory. We link our tax data with county-level food insecurity measures and other data from the Current Population Survey. Treating grocery taxes as exogenous, we estimate that a one percentage point increase in grocery tax rates is associated with a 0.84% increase in the probability of being food insecure for low-income households. Using these estimates, we conduct policy simulations of grocery taxes that have been recently considered in six states and assess the potential impacts on food insecurity. One caveat is that our estimator may be biased towards or away from zero depending on whether increases in grocery taxes within counties over time are positively or negatively correlated with unobservables affecting food security. However, assuming the onset and removal of grocery taxes within a county are exogenous, our results show that proposed grocery taxes may exacerbate food insecurity by one to five percentage points.