Tax “holidays” may do more for retailers than consumers

Billed as offering financial help for parents and teachers who spend, by one study’s account, an average of $500 a year on classroom supplies, the end of summer has retailers holding their annual back-to-school sales across the country. The effort is bolstered by so-called “tax holidays” on sales in nearly 20 states. 

Starting Friday and running through Sunday, Tennessee retailers are not charging a tax on clothing and school supplies that cost less than $100 each, while shoppers in Florida get a similar break next weekend. All told, 17 states will hold a sales tax holiday in 2018, down from a peak of 19 states in 2010, and up from 16 states last year, according to the Tax Foundation. 

But as states opt in or out — Massachusetts has established a permanent sales-tax holiday one weekend in August, starting next year — there’s debate over the costs and benefits of the practice. 

“The sales tax holiday gives consumers a much needed break and supports business across the Commonwealth for our hardworking retailers,” Massachusetts Gov. Charlie Baker said in a statement supporting making the tax-holiday weekend a fixture.

In years past, Massachusetts refrained from holding the tax holiday, which costs the state about $20 million a year, when its coffers were low. 

“It’s a good idea, in general, I would guess, as long as it doesn’t impact the revenue of the state, because we’ve got to spend money on things,” Neil Robinson, a Northampton resident told a local news outlet. 

“It’s always good for business to have the sales-tax free weekend,” Monte Newman, the store manager at Manny’s Appliances in Hadley, Massachusetts, said.

In Georgia, lawmakers have taken the opposite route, declining to renew the state’s long-running sales tax holiday for a second consecutive year, after both the right-leaning Tax Foundation and the left-leaning Georgia Budget & Policy Institute called it bad public policy. The state entity successfully argued the sales holiday, which it estimates costs the state about $40 million a year and local governments another $30 million in tax revenue, is too costly for a state that still includes “austerity cuts” in school-funding budgets. 

Conversely, Wisconsin Gov. Scott Walker in April used his veto power to create a five-day holiday in early August from paying sales taxes for back-to-school shoppers, at an estimated cost to the state of $14.8 million.

Some retailers raise prices during such tax holidays, offsetting consumer savings, according to the findings of a July study by the Tax Foundation. Tax holidays don’t promote economic growth or significantly increase purchases, but rather shift the timing of when they are made, the think tank found.

As Heather Colvin, the newly elected PTA Council president for Glynn County Schools in Georgia told the Brunswick News: “I just do what every other mom does … I try to stock up when they do have the deals on the things I know my students will have to have all year — paper and pencils, things like that.”

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