Tax Breaks Won't Fix Food Deserts

PLUS: Happy two year anniversary to this newsletter!

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Elected officials love to try to “fix” food deserts — those areas of the country where residents have limited access to a grocery store — as both an economic and public health intervention. A perennial favorite tactic is to offer tax breaks to supermarkets that are willing to locate in food deserts and bring fresh food to underserved areas.

The newest entrant in this particular genre — called the the Supermarket Tax Credit for Underserved Areas Act — comes from Republican Rep. Ken Buck of Colorado and Democratic Rep. Steve Cohen of Tennessee. Like previous versions of the bill Cohen has introduced, it provides funds for supermarket owners to rehab buildings in food deserts, hire workers, and provide fresh fruits and vegetables, with a food desert defined as rural areas where there are no grocery stores within 20 miles and urban areas where there are none within a mile.

“In a year, I’m hoping that we have the legislation passed,” said Buck, who reportedly became concerned with this issue thanks to local news coverage of a grocery store closing. “In two years, I think you’re looking at the possibility of these grocery stores locating in rural America.”


Fixing food deserts is a laudable goal, of course. But tax incentives aren’t the way to get there. I dug in on this topic for a piece a couple of years ago, and found that using tax breaks to try to cajole grocers into entering underserved areas gets the food access problem backward — it’s not really about access at all, but corporate consolidation in the grocery sector and the purchasing power of consumers.

Elected leaders at all levels of government have collectively spent hundreds of millions of dollars on grocery store incentives. These programs suffer from the same problems as most other corporate giveaways: Most of the time, they’re incentivizing actions that would have happened anyway. A study of the federal New Market Tax Credit found that 70 percent of grocers that used it to open in a food desert would have done so even in the absence of subsidies. That’s just wasted money that could be better used on other poverty reducing measures.

Incentives simply can’t surmount the far more pressing issue: As grocery corporations have consolidated, they’ve pulled out of many low-income neighborhoods, both rural and urban, and have been reluctant to open new stores in food deserts that would compete with their existing stores elsewhere. As an Associated Press analysis found, the nation’s top 75 food retailers opened 2,434 grocery stores between 2011 and 2015, and only 250 were in food deserts. And no amount of public funding can change their executives’ minds.

But even those numbers don’t get at how top-heavy the grocery industry really is. Today, the top four grocers sell nearly half of all groceries in the country, with Walmart making up a quarter of the market alone. And those big chains, especially, don’t like to open new stores in lower-income areas, as both cities and rural areas alike have seen over and over — those areas are the last to get stores and the first to see them closed when harder times come along.

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And this isn’t just about location, but ruinous price competition: Rural grocers actually cite consolidation between the major grocery chains — which gives those chains increased power to demand lower prices and exclusive contracts from suppliers — as their largest challenge.

The void major retailers leave is then filled by dollar store chains — which have themselves consolidated into just two major players, Dollar Tree and Dollar General — where food is actually more expensive than it is at major grocery chains, despite the “dollar” moniker.

All that said, access to better groceries isn’t ultimately about distance. Studies actually show that higher-income and lower-income households spend about the same amount of money, on average, in supermarkets and travel roughly the same distance to visit their favored stores. The issue is that fresh food is more expensive, and so lower-income folks buy less of it to stretch their money further.

As this study (with the excellent title “Let Them Eat Kale”) shows, upstream interventions to provide funds and economic power to people are far more effective in achieving the aims of expanding access to healthier food than anything aimed at the corporations supplying it.

And that makes sense: People know what fresh food is and where to find it. To think otherwise reeks of paternalism. What lower-income folks needs is money, not a map to the grocery store.

Yet supply-side attempts to cajole grocery stores into particular places persist because they make for good politics, eating up the attention that could be focused on better solutions.


TWO YEARS!: I launched this newsletter two years ago today, and couldn’t be more excited about the community we’re building here. Thanks to all of you for subscribing, sharing, sending emails, and generally being a great group of folks.

For those interested (or for newer subscribers who missed them), these are the five most popular editions I’ve posted here:

  1. State Secrets

  2. Hook, Line, and Sinker

  3. Interstate Love Song

  4. Enjoy Your Pandemic Waterpark

  5. A Shocking Win in Texas

I’m very interested to hear from you all about what you’d like to see more of, less of, or done differently. Send me an email or direct message on Twitter or comment on this post with the button below if you have thoughts.

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ONE MORE THING: Time Magazine’s Alana Semuels had a really great piece recently on how big tech corporations such as Facebook and Google take advantage of small towns across America. It’s an excellent look at how the data centers these corporations cajole elected officials onto subsidizing don’t create the sort of stable jobs and revenue promised. Read the whole thing here.

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Thanks again!

— Pat Garofalo