During the high inflation of recent years, many states offered relief to consumers by temporarily cutting or suspending their sales tax on groceries. However, in 2025, some of those same states are letting those tax holidays expire. In some cases, they are even considering bringing back a grocery tax that had been eliminated years ago. This unpopular move is not happening by accident. It is the result of new and intense financial pressures on state governments across the country.
Facing Major State Budget Shortfalls
The primary reason for this change is a looming budget crisis. The economic boom that followed the pandemic has cooled significantly. States are now facing lower-than-expected tax revenues. To avoid deep cuts to essential services like education, healthcare, and infrastructure, lawmakers must find new sources of income. A tax on groceries, which is a very broad and stable source of revenue, is an unfortunate but effective solution.
The Expiration of Temporary Tax Holidays
Many of the grocery tax cuts that were passed in 2023 and 2024 were never intended to be permanent. They were temporary “tax holidays” with a specific expiration date written into the law. In 2025, many of these laws will have expired. The political will to spend the money to extend these tax breaks is often not there, especially when the state is facing a budget deficit. This means the tax comes back automatically.
A Shift in Political Priorities
A change in a state’s political leadership can also lead to a new approach on taxes. A new governor or a new majority in the state legislature might have different priorities. They may prefer to use the revenue from a grocery tax to fund a new program or to cut a different type of tax, like property or income taxes. This represents a fundamental shift in a state’s fiscal policy.
The Argument for a Broader Tax Base
Some economists and politicians argue that it is better to have a low sales tax on a very broad range of goods, including groceries, than a high sales tax on just a few items. They believe this creates a more stable and predictable source of revenue for the state. In this view, eliminating all exemptions, including the one for food, allows the state to lower its overall sales tax rate, a policy some find more fair.
A Move Toward Targeted Relief Instead
Many lawmakers also argue that a grocery tax exemption is an inefficient way to help low-income families. This is because the tax break also benefits wealthy shoppers who do not need the assistance. Some states are now choosing to bring back the grocery tax. They plan to use the new revenue to fund more targeted relief programs. This could include an expanded SNAP program or a direct tax credit for low-income households.
The Unpopular Reality of State Finances
No politician wants to be the one who raises taxes on food. However, the difficult financial reality of 2025 is forcing many state governments to make unpopular choices. The return of the grocery tax is a direct result of slowing economies and the end of temporary relief measures. For consumers, it is an unwelcome sign that the era of high inflation and its aftershocks is not over yet.
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