Last year, the Oklahoma Legislature eliminated the state’s portion of sales tax on grocery items. This 4.5% cut was estimated to save the median Oklahoma household approximately $235 a year, but citizens in our state can be forgiven if they still feel a financial pinch when they go grocery shopping.
Recent reports have listed Oklahoma in the Top 10 states with the highest cost of groceries, highest share of monthly household income spent on groceries, and the highest proportion of incomes used to purchase groceries. All these reports were published after the state eliminated its portion of the sales tax on grocery items, so what is keeping the price of groceries so much higher in our state?
Look no further than the “Unfair Sales Act” of 1949.
This little-known law requires all retailers in the state to presume a “proportionate part of the cost of doing business” of 6% added to their costs. Essentially, this means that every business in Oklahoma is allowed to mark up the cost of their goods by 6%, meaning you are paying an artificially mandated mark up on groceries that is higher than the state sales tax was. And this law doesn’t only apply to groceries. The law covers the sale of gasoline, certain medications, pet food, baby supplies and many other items as well.
The justification for this legislation is that it claims to protect small business owners against large retailers such as Walmart, Target, and Homeland.
While this may be partially true, the economic science on protectionism is clear: the gains accrue to a small number of producers at the expense of the rest of the community. And this expense is not shared equally. While we all suffer from these higher prices, those who suffer the most from such laws are lowincome households who already struggle to pay for necessary items but must pay a disproportionate share of their earnings toward this markup. The failure of protectionism is clear here. The costs are passed on to all of us while the benefits are shared by the few owners who get to reap inflated profits.
Fortunately, the Oklahoma Legislature may be prepared to provide relief to its citizens. Senator Julie Daniels (R-Bartlesville), has filed SB 638 which would eliminate the price markup requirement currently in state law. This simple change would bring a larger relief to Oklahoma households than the reduction in the state’s portion of the sales tax on groceries, and it would cost the state nothing, as these funds flow directly into the hands of the companies that benefit from the markup. The bill was approved by the Senate Business and Insurance Committee. Daniels’ bill will help decrease prices on groceries, gasoline, and other important items Oklahoma families purchase every day.
While the House recently passed similar legislation (HB 1024), this bill would not impact the 6% markup currently required on gasoline – essentially forcing Oklahoma families to continue paying inflated prices at the gas pump.
If local communities are concerned that large retailers will undermine the ability of locally owned businesses to operate, they have a variety of policy tools they could implement to help protect their small business owners including subsidies, tax credits, campaigns to shop local, and many other forms of support. However, those local communities, and the special interest groups whose members benefit from the price mark-up requirement, should not be allowed to impose an extra cost on Oklahoma families trying to buy gas for their cars or put food on their table simply to protect business owners who want to avoid additional competition and grow their own pocketbooks.
Oklahoma Voice (oklahomavoice.com) is an affiliate of States Newsroom, the nation’s largest state-focused nonprofit news organization, supported by grants and donations. Oklahoma Voice provides nonpartisan reporting, and retains full editorial independence.
