Sales tax holidays: A gimmick's flaws | Arkansas Blog

Tuesday, July 26, 2011

Sales tax holidays: A gimmick's flaws

Posted By on Tue, Jul 26, 2011 at 8:50 AM

salestax.jpg
Nice timing. Arkansas's first back-to-school sales tax holiday is coming up and the Tax Foundation is out with a national roundup on states with such holidays and a recitation of the things that are wrong about these politically popular events. For example:

* The evidence strongly shows that sales tax holidays do not promote economic growth or significantly increase consumer purchases; instead they shift the timing of purchases. Some retailers raise prices during the holiday, reducing consumer savings.

* Sales tax holidays create complexities for tax code compliance, efficient labor allocation, and inventory management. However, free advertising for what is effectively a paltry 4 to 7 percent sale leads many larger businesses to lobby for the holidays.

* Most sales tax holidays involve politicians picking products and industries to favor with exemptions, arbitrarily discriminating between products and across time, and distorting consumer decisions.

* While sales taxes are somewhat regressive, this is often exaggerated to sell the idea that sales tax holidays are an effective way of providing relief to the poor. To give a small amount of tax savings to low-income individuals, holidays give a large amount to others.

* 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 a sign 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.

Just so you'll know: The Tax Foundation is no liberal tax-and-spend outfit. Quite the reverse. I note for the record that the National Federation of Independent Business affiliate in Arkansas is touting the tax holiday as a way to get people "in the mood to spend." They undoubtedly would like to leverage this into still more tax exemptions.

Here are the somewhat detailed rules on the Arkansas tax holiday Aug. 6-7 on clothing (items worth less than $100 and accessories worth less than $50 per item) and school supplies (calculators are covered, for example, but not computers and other electronic gadetry).

Tags: , , ,

From the ArkTimes store

Favorite

Comments (6)

Showing 1-6 of 6

Add a comment

 
Subscribe to this thread:
Showing 1-6 of 6

Add a comment

More by Max Brantley

Readers also liked…

  • Saturday's open line

    Got any thoughts? Put them here.
    • May 21, 2016
  • A response to police arrests becomes a tutorial on race, class and policing in Little Rock

    John Walker, the 79-year-old civil rights lawyer, and his associate, Omavi Shukur, 29, a young lawyer devoted to criminal justice reform, talked to press this afternoon about their arrests Monday by Little Rock police for supposedly obstructing governmental operations in observing and attempting to film a routine police traffic stop. It was a tutorial on sharp views of race, class and governance in Little Rock.
    • Sep 29, 2016
  • Kenneth Starr: A comment from Betsey Wright

    Betsey Wright, former President Bill Clinton's chief of staff when he was Arkansas governor, responds bitterly to a New York Times article today quoting Whitewater Prosecutor Kenneth Starr's warm words about Clinton. She can't forget the lives Starr ruined in Arkansas.
    • May 24, 2016

Most Shared

Most Viewed

Most Recent Comments

Blogroll

 

© 2017 Arkansas Times | 201 East Markham, Suite 200, Little Rock, AR 72201
Powered by Foundation