Jared S. Hopkins
Times-News writer

Rebekah McDonough of Jerome typically spends about $800 a month on groceries. She and her husband, a milk hauler, have five kids to feed. And they do it all on a household income of about $29,000.

So when McDonough hears about a proposal from Gov. C.L. "Butch" Otter to provide up to $90 per person in grocery tax credit annually, she welcomes the relief.

"We have so many taxes," she said Friday as she juggled three of her kids and a shopping cart full of food. "Anything matters."

Homemakers like McDonough, who said she travels to Winco in Twin Falls because it's cheaper than other grocery stores, are just the people Otter wants to see receive additional grocery tax credit.

All Idahoans get a $20 income tax credit annually; seniors $35. Under Otter's plan, seniors would receive $15 and the $20 would be eliminated.

But new relief for those who need it most - the McDonoughs would receive close to the maximum, according to state officials - might be just around the corner if the Legislature supports Otter's recommendation. He announced it Monday in his State of the State address.

Many legislators said they like Otter's proposal, but there are alternatives.

A tough tax?

Otter has said he prefers targeting low-income people for the tax credit because they need the relief more than wealthier Idahoans, tourists and others whose budgets are not heavily invested in food. Otter himself is a millionaire.

"I have carefully considered eliminating the (6 percent) sales tax on groceries," he told the joint Legislature last week. "There clearly is a need to reduce the tax burden on lower-income individuals and families who must spend a disproportionate amount of their income on food."

Credit would be given once a year on a sliding scale of up to $90 for each member of a family of four that earns $25,000.

About 1.28 million people are receiving the $20 grocery credit right now or are scheduled to in fiscal 2007, and with the proposed change, about 730,000 people would receive $20 or more, according to Mike Ferguson, chief economist in the states' Division of Financial Management.

He said the changes would increase relief to those who need it the most.

The tax credit would break down as follows, according to Ferguson.

*320,000 Idahoans would be eligible to receive the full $90 credit

*411,000 would get between $20 and $90 of credit.

*100,000 would get $10 of grocery credit.

*500,000 Idahoans would receive no credit.

Help for real people

Jose Garcia and his wife, Olivia, live in Gooding but buy their groceries in Twin Falls.

Jose, 46, worked on farms for more than 20 years but is now a landscaper.

His income is about $38,000, and he said he switched jobs because crops simply don't guarantee enough money. Being a landscaper provides a more comfortable wage - something he said is increasingly important while the cost of living - and food - continues to rise.

"It's tough, but you get taxed on everything," he said. "You buy a new car, you get taxed. If you want to sell it, you're going to get taxed."

For a family of four to receive the full $360, household income cannot exceed $25,300. Households with incomes of $50,301 or more would get no tax credit.

In Twin Falls County, the median household income is about $40,000, according to the Census Bureau's 2005 American Community Survey. The median income means half the people make less than that and half the people make more.

In the Magic Valley, more than 6,000 households, including 18,000 individuals, have an annual income of about $24,000, according to Leanne Trappen, the community services director for the nonprofit South Central Community Action Partnership, which helps low-income people in crisis. She said those figures represent the majority of people she helps.

"I would definitely support what he's proposing because it's better than nothing," she said.

One catch, however, is food stamps: in months people receive food stamps, they cannot get the grocery credit. About 93,000 people will be ineligible due to food stamps, according to Ferguson, but that figure is an annual average, which means if a person receives food stamps for half the year, they are considered half a person and get half the credit.

Too many taxes?

Idaho and Utah are the only contiguous states west of the Rockies to tax groceries. Beginning Jan. 1, Utah cut the tax on groceries to 2.75 percent. But that only applies to the state tax. Local options and county taxes still apply.

Wyoming's exemption will expire in 2008, but a move is afoot to extend it.

Nationwide, 18 states tax groceries, according to the Federation of Tax Administrators, a nonprofit group made up of state government tax officials, but bills are pending in several states to eliminate or reduce the tax.

In Idaho, talk of grocery tax relief has circulated for years, but the Aug. 25 special session â€-quot; in which the sales tax increased by a percentage point to help offset $260 million in property tax cuts â€-quot; has made it more likely to become reality this session.

"There probably is more impetus today for removal of the sales tax on groceries than I have seen (since) I've been in the Senate," Senate Majority Leader Bart Davis said earlier this month.

Otter's plan differs from that of Lt. Gov. Jim Risch, who, during his seven-month tenure as governor, proposed phasing out the grocery tax 1 percent a year for six years.

Otter, and some lawmakers, however, said Risch's plan â€-quot; about $30 million in relief a year â€-quot; could cost the state $180 million in revenue.

The other alternative â€-quot; favored by Democrats â€-quot; is to eliminate the tax altogether.

Shonne Carter, 42, of Twin Falls, has nine kids and spends anywhere from $500 to $1,000 a month on groceries.

She mentioned that although Oregon's property taxes are slightly higher than Idaho's, Oregon doesn't tax food.

"I think it's stupid," she said of taxing groceries, "but I believe if more people were less wasteful and more conservative that their dollar could go farther."

One weakness of Otter's proposal is that taking away the $20 grocery tax credit could raise taxes for many Idahoans, said Ken Robison, who served 20 years in the state Legislature and was a member of the budget committee.

He favors eliminating or phasing out the tax as the best way to give "real relief to the people of Idaho," he said.

Judith Brown of United Vision for Idaho, a nonprofit, nonpartisan group that pushes for balanced tax policy, said she is generally in favor of the proposal.

"With few reservations, we're pleased with this proposal because it really targets relief to lower and middle income and that's who the sales tax hits especially hard," she said. "Those are the families that benefit the least from the property tax changes in August."

Reporter Jared S. Hopkins can be reached at (208) 735-3204 or jhopkins@magicvalley.com