Shoppers in 15 states this month are buying back-to-school supplies on the backs of their states – enjoying a holiday from paying state sales taxes on everything from clothes to shoes to computers.
August is the most popular month for the tax holidays, but they don't come without controversy. This year, in particular, criticism is reaching a crescendo with complaints that the holidays have become ineffective at what supporters once claimed they were: a win-win for consumers and states. Instead, critics say, the breaks are misleading "gimmicks" that have outlived their usefulness.
Other tax holidays are coming in September, when consumers in Georgia can buy energy products tax-free, and in
Louisiana, where firearms and hunting supplies will be exempt. Starting next
February, the cycle begins again with exemptions for hurricane preparedness
supplies in Alabama.
In all, 17 U.S. states this year have some form of a sales
tax holiday, mostly in August, up from 15 last year and down from
a peak of 19 states in 2010. The trend began with just Michigan and Ohio in
“States support these things for a variety of reasons, but most
importantly, it sounds like a good thing – who doesn’t want a holiday from
sales taxes?” Jackson Brainerd, a policy associate at the nonpartisan National
Conference of State Legislatures, told AMI Newswire. “But there’s a pretty
overwhelming, bipartisan consensus that they don’t accomplish what they
The holidays are most popular with politicians and consumer
and retailer groups, who say the breaks also benefit retailers with increased traffic.
In Ohio, for example, this month will see the second-ever
back-to-school sales tax holiday; the Ohio
Council of Retail Merchants had pushed for it for a decade.
A council spokeswoman told the Youngstown Vindicator this
month that the holiday is a success. “Ohioans love a sale, and we certainly know they really love not having to
pay sales tax,” said director of governmental affairs and public relations Lora
Miller. “We believe it will be even better [this year] because more people will
Miller appears to be backed up by a study at the University
of Cincinnati, where economists studied the results of the state’s first
back-to-school tax holiday last year. The study found consumers saved $3.3
million in just three days – while overall retail sales jumped 6.48 percent.
At the same time, however, this year’s holiday in Ohio is projected to cost the
state $22 million in lost revenue.
Treacy Morgan, media relations manager for the National Retail Federation, called tax holidays "a triple win."
win because they sell more, consumers win because they save money and
politicians win because they’ve given their constituents a tax break
that ultimately didn’t cost the treasury a cent," she told AMI Newswire.
On the other hand, a pair of recent reports blistered the
argument of tax holiday proponents, and echoed the prevailing view among
economists that the holidays simply shift the timing of consumers’ purchases
and entangle retailers in endless complexities regarding compliance, among
The nonpartisan Council of State Governments (CSG) has said the
holidays are “often nothing more than ineffective fiscal gimmicks,” and the
nonpartisan, Washington D.C.-based Tax Foundation likewise called them “no
part of sound tax policy.”
“Sales tax holidays have
enjoyed political success but, recently, policymakers are re-evaluating them,” said
the foundation’s July 22 report. “Rather than providing a valuable tax cut or a
boost to the economy, sales tax holidays impose serious costs on consumers and
businesses without providing offsetting benefits.”
Jennifer Burnett, CSG’s director of fiscal and economic
policy, said the council has no official position on the tax holidays
but that the idea behind them will continue to collect scrutiny.
“This is particularly true for sales tax holidays, which can
result in millions of dollars in lost revenue that must be made up through
spending cuts or tax increases later down the road,” she said in a statement to