The incidence of grocery taxes in US food and factor markets

We study the incidence of county-level grocery sales taxes across the United States from 2010 to 2019. We find substantial grocery tax over-shifting to consumers. On average, a grocery tax that generates $1 in grocery tax revenue leads to a $1.44 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 increased retail margins arising from grocery tax over-shifting do not translate into increased earnings for food retail workers nor higher farmgate prices for farmers.