Are Sales Tax Holidays Good Policy?

Commentary & Community

Are Sales Tax Holidays Good Policy?

 

It’s back-to-school season, so that means parents are rushing to stores while clutching school supply lists.  In some states, they may get a brief reprieve from paying sales tax on clothes or notebooks. This type of sales tax holiday may sound like a great deal for consumers, but some experts say it is bad policy.


Sales tax holidays are promoted as a way to spur retail sales as well as help families afford necessary school supplies. Politicians in 16 states have enacted these sales tax holidays, and they cover a variety of goods.

 

Bob Peterson, a state senator from Ohio, co-sponsored legislation in that state creating a sales tax holiday this year. He says, “Ohioans saved millions of dollars on back-to-school items during the prior Sales Tax Holidays, and stores saw significant boosts in statewide retail sales.”

 

According to the nonpartisan Tax Foundation, however, these supposed benefits are an illusion. Here are some of the problems with this brief window of tax-free shopping, according to the foundation’s experts:

 

“Most sales tax holidays involve politicians picking products and industries to favor with exemptions, arbitrarily discriminating among products and across time, and distorting consumer decisions… Political gimmicks like sales tax holidays distract policymakers and taxpayers from genuine, permanent tax relief. If a state must offer a ‘holiday’ from its tax system, it is an implicit recognition that the state’s tax system is uncompetitive. If policymakers want to save money for consumers, then they should cut the sales tax rate year-round.”

 

What do you think? Do you support sales tax holidays? Or do you think that these holidays are gimmicks that have no real positive effect?

 

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