Conservative Group Calls for End of Tax Holidays
So-called sales tax holidays may be popular with politicians, retailers and the media that write stories about the events, but they do not create any meaningful economic benefit and simply shift sales from one period to a next. That is the conclusion of a study by the Tax Foundation.
The group, which was formed in 1937 in response to the growth of government under Franklin Roosevelt, found that sales tax holidays complicate “tax code compliance” and create added costs for business as they make labor and inventory adjustments.
Ultimately, the group found: “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.”
With the current spending mood of consumers, few retailers would argue that they expect to get a big lift as a result of tax holidays this year (16 states have holidays, down from 19 last year). However, there are many that disagree with the Tax Foundation’s findings.
Rick McAllister, CEO of the Florida Retail Federation, told The Associated Press that the group’s findings were “Ludicrous … Why do we want to go to all this trouble if all we did was move sales from two weeks prior or two weeks after this? We wouldn’t do it. It wouldn’t make any sense.”
Mr. McAllister said sales tax holidays work because “there’s just something psychological about not wanting to pay tax. Let’s face it, Amazon.com has got rich doing it.”
- Sales Tax Holidays: Politically Expedient but Poor Tax Policy – Tax Foundation
- Fla. Retail Federation defends sales tax holiday – The Associated Press/Bloomberg Businessweek
- Tax holiday won’t bring buying spree – The Tennessean
Discussion Questions: What is your view on sales tax holidays? Are they ultimately good for businesses and consumers?