West Virginia has one of the lowest per capita incomes in the country, just third from the bottom. It also is one of only seven states to levy its full sales tax on food bought for home consumption.

"States that have a sales tax on food tend to be lower income states," said Nick Johnson, director of the state fiscal project for the Center on Budget and Policy Priorities, a non-partisan, non-profit group based in Washington, D.C.

Of the seven states that apply the full value of their sales tax on food, five of them are in the bottom 10 in the country for per capita income.

West Virginians could say, "thank goodness for Mississippi," because Mississippi -- the state with the lowest per capita income -- charges the highest sales tax on food in the United States at 7 percent across the board. The Mountain State is not far behind at 6 percent.

According to Johnson, 45 states and Washington, D.C., levy general sales taxes. Of those, 29 states and D.C. have eliminated their sales taxes on food. Four states, including Virginia, tax food at a lower level than their sales tax, and another five states apply their full sales tax against food purchases but offer credits or rebates to offset some of those taxes paid.

New Mexico and Louisiana are the most recent states to begin phasing out the sales tax on food.

Gov. Joe Manchin wants lawmakers to consider reducing or removing West Virginia's sales tax on food, which generates about $150 million a year for state coffers. Trimming it by one percentage point, to 5 percent, would cost the state about $25 million a year. Manchin also has suggested periodic holidays from the sales tax on food, and it remains unclear what proposal he may take to legislators during a planned September special session.

In the abstract, however, the idea is premature at best despite healthy government revenues, one economist told The State Journal.

'Not the Right Time'

Mehmet Tosun, director of the West Virginia University Public Finance Program, is in the middle of a research project on the food tax, and his preliminary findings lead him to discourage state government from adjusting the food tax right now.

"If you get rid of it, what are you going to do to replace that revenue? As a state, there is not a lot of revenue and there is not a low tax burden," Tosun said. "In terms of revenue generation, it's not a very good idea at this point to get rid of the food tax. ... And temporary fixes may not be very effective. My guess is that it's probably better to wait a couple more years to look at eliminating the food tax."

West Virginia is seeing record budget surpluses because of increased collections in personal and corporate net income taxes and severance taxes, which reflect a booming energy market.

But the days of flush revenues may not last long, Tosun cautioned, and government leaders should not bank on surpluses to finance tax breaks.

"On the expense side, we're not in a very good position, with our increasing health care and pension costs," Tosun said. "My personal, economist's opinion is that it's not a very good idea to look at removing the food tax right now."

Tosun said West Virginia is at a competitive disadvantage to surrounding states because only Virginia levies a sales tax on food. Even then West Virginia loses because Virginia's food tax is 2.5 percent.

"We lose retail activity, which is bad for the economics of the state. ... I don't want you to think I'm defending the food tax," Tosun said. "It is a regressive tax. It probably is better to do away with it, but now is not the right time."

Declining Revenues

According to Johnson, most states that have phased out their food taxes over the years did so when they had budget surpluses.

"Some states eliminated it, but allowed their localities to keep it because the locals didn't want to lose that revenue. ... Allowing the localities to keep it mitigated the fiscal impact," Johnson said. "But the trend over the last 10 to 15 years to repeal the food tax is because it keeps getting lower. Food inflation has been lower, and there is a rise in restaurant dining."

Johnson said 40 years ago, the typical family spent a third of its household budget on groceries. Now, that is down to just 15 to 20 percent, he said, which means states earn less money on their food taxes -- except low-income states.

"It's a big hit there," he said. "Lower income families spend a greater portion of their budgets on food."

West Virginia tried to live without a food tax for a time. In the 1980s, the state did not impose sales taxes on food. But while addressing a fiscal crisis at the end of the decade, lawmakers brought the food tax back.

"That's quite unusual," Johnson said. "West Virginia is just about the only state that did that."

If West Virginia moves forward with any reduction or elimination of the food tax, Johnson said "one argument is that if you lose revenue from sales tax on food, and the state hits hard times, there is pressure to raise overall sales tax, which is almost as regressive as having a tax on food."