The incidence of grocery taxes in <scp>US</scp> food and factor markets

Abstract 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.