(WITHDRAWN) Variation in State Tax Policies and Food Insecurity

Background: State taxes are not only regressive but also inefficient, as they drive families further into poverty, which requires additional federal money for welfare programs while raising very little revenue (Newman & O’Brien, 2011). Furthermore, evidence from one study suggests that state taxes are associated with increases in mortality, nonmarital births, crime, and high school dropout (Newman & O’Brien, 2011). Due to these variations in states’ tax policies and structure, tax burden varies substantially for low-income families across states. Therefore, families with similar levels of income experience very different amounts of net resources across states. Given the relationship between state tax burden and a household’s disposable income (Newman & O’Brien, 2011) and the relationship between income and food insecurity, it is likely that tax burden is a predictor of household food insecurity. However, there is little research on the relationship between tax policies and household food insecurity. Recent evidence from Canada suggests that increases in income and sales taxes rates are associated with increases in food insecurity (Men et al., 2021), while increases in tax credits – which decrease tax burden – are associated with decreases in food insecurity (E. M. Brown & Tarasuk, 2019).

Methods: The current study examines the effects of state taxes on food insecurity, merging newly compiled policy data with nationally representative data from the Current Population Survey Food Security Supplement (2002-2019). The analytic sample includes 139,755 households with children (less than 18 years of age) and an income less than three times the Federal Poverty Line. Linear probability regression models with state and year fixed effects are used to estimate the relationship between tax burden and food insecurity.

Results: Results suggest that higher levels of tax burden are associated with increased likelihood of food insecurity, such that a one percentage point increase in tax burden is associated with a 0.1 percentage point increase in the likelihood a household reports food insecurity. Analyses examining specific taxes individually indicate that state sales taxes are particularly detrimental, while state EITCs are protective against household food insecurity. Post regression simulations provide policy relevant estimates of food insecurity rates under different parameters. In states with no EITC, the predicted rate of food insecurity is 24.6%; however, the rate falls to 24% with a state EITC providing 15% of the federal benefit. Under a 6% sales tax, the predicted rate of food insecurity is 25% but falls to 19% with no sales tax (24% decline).

Implications: The burden of funding the government is unequal in the United States. The growing tax burden on low- and middle- income Americans counters political narratives about supporting working families. This is especially relevant given the COVID-19 pandemic, which has resulted in the worst economic downturn since the Great Depression and enormous state budget shortfalls, resulting in policymakers increasingly seeking ways to increase tax revenue.