Reduced Grocery Prices Tax Credit

How to Reduce Grocery Prices at the Checkout Counter

Americans are justly complaining about high grocery prices. Here is a proposal for a legislative and Executive federal program to reduce high grocery prices. Vice-President Harris should advocate for adoption of this proposal to lower grocery prices.

The President can propose and the Congress could adopt a Reduced Grocery Price Tax Credit. Grocery profit margins are only 1-2% of sales prices. Here is how the Reduced Grocery Price Tax Credit would work and result in a higher margin for the grocer:

A federal Tax Credit would be provided to Grocers who reduce current grocery prices to the prices they charged for each item in January, 2021. The Tax Credit would equal the differential in the price of an item sold by the grocer in January 2021 compared to the price they are charging in October, 2024. That differential would then be multiplied by the sales volume of the item at the reduced price they sell the item A in October, 2024 and after. The Reduced Grocery Price Tax Credit would equal the Differential times the current Sales Volume at the Reduced Sales Price times 50%.

Here is an example. Assume the grocers price for item A in January 2021 is $5.00. Also assume the price for item A is $8.00 in October2024. The Differential would be $3.00. Now assume the sales volume of item A in November, 2024 at the Reduced Price is $10,000. The Reduced Grocery Price Tax Credit would be the Differential of $3.00 times the Sales Volume of $10,000 times 50% or $15,000.

The grocer would receive a total of $10,000 of Sales Volume at the Reduced Price together with the Reduced Grocery Price Tax Credit of $15,000 for a total realized by the grocer of $25,000 on the Reduced Price Item. A.

The Total Amount Realized would probably greatly exceed the margin the grocer would otherwise receive without the Tax Credit. Grocers should have a great incentive to reduce prices and apply for the Reduced Grocery Tax Credit to increase their profit margins. The Grocer would also have a competitive advantage over any competitors who choose not to reduce prices and not to apply for the Reduced Grocery Price Tax Credit.

That competitive advantage would also cause non-participating grocers to reduce their prices so as not to lose market share to the Tax Credit participants.

Customers would see a price reduction of $8.00 items to $5.00. A consumer win.