Sales tax holiday coming up | Arkansas Blog

Wednesday, July 20, 2011

Sales tax holiday coming up

Posted By on Wed, Jul 20, 2011 at 3:18 PM

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With little else to brag about, Republicans are Twittering today about the coming back-to-school sales tax holiday, one of the tax cuts passed in the 2011 legislative session. Major retailers scoff at their value, I know from experience. They don't increase total sales, they just shift them around. They have the curious effect of laying more taxes on consumers because buyers are drawn into stores for the presumed savings on the limited number of items covered by the holiday and then spend money on other stuff. Do retailers adjust pricing to maximize profits at such times? What do you think?

Anyway, I thought it worth a reminder to the TPers honking about this magnificent achievement of this story in The Hill last year about a study from a decidedly non-liberal group:

Upcoming sales-tax holidays are nothing more than political gimmicks that do little to truly help consumers, states an updated report by the Tax Foundation.

"Sales-tax holidays are gimmicks designed to win political points for lawmakers," said Tax Foundation staff economist Mark Robyn in prepared remarks.

Robyn helped author the study with Tax Counsel and Director of State Projects Joesph Henchman and Adjunct Scholar Micah Cohen.

The sluggish economic recovery has prompted 18 states to offer sales-tax holidays beginning in August. That figure is up from 16 in 2009 and 17 in 2008. The holidays are aimed at boosting back-to-school sales.

The Tax Foundation report finds that sales-tax holidays do not promote economic growth or significantly increase consumer purchases. Such sales merely shift the timing of purchases.

The study also states that most of these holidays involve politicians picking products and industries that can distort which products consumers choose to buy.

"Taxes should raise revenue, not micromanage a complex economy by picking winners and losers in the market," Henchman said in prepared remarks. "If a state must offer a 'holiday' from its tax system, it's a sign that the state's tax system is uncompetitive, something that must be addressed with permanent reform."

PS — Roby Brock's Talk Business earlier did an item on the sales tax holiday with valuable links to the extensive and sometimes confusing rules that will apply to the tax exemption. Clothing and school supplies are covered, but with price limits.

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