A Colorado back-to-school sales tax holidayA sales tax holiday is a period of time when selected goods are exempted from state (and sometimes local) sales taxes. Such holidays have become an annual event in many states, with exemptions for such targeted products as back-to-school supplies, clothing, computers, hurricane preparedness supplies, and more. bill met a quick end at the hand of the state’s Senate Appropriations Committee. The bill had already passed the House and the Senate Finance Committee, but did not gain support in the Appropriations Committee. The Denver Post reports:
The fact that it was a bill sponsored by their president, who is running for Congress in the 4th Congressional District, didn’t sway Senate Democrats on the committee. Nor did the fact that the bill passed with significant support in the GOP-led House convince any Republicans that the bill was worth voting for.
The sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. holiday would have been authorized for 5 years, beginning after the first year where state personal income grew by at least 5%.
The Tax Foundation (and other policy experts) has consistently opposed sales taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. holidays. They are poor tax policy. They are gimmicks that do little or nothing to help the economy or reduce overall tax burdens. The increase in consumer spending associated with a sales tax holiday is largely due to shifts in the timing of purchases, not overall increases in purchases. Consider: how many parents forgo necessary school supplies for their children because of the added cost of the sales tax?
If the justification is that families need a tax cut, there are ways to accomplish this that avoid the unnecessary costs associated with requiring retailers and consumers to jump through a bunch of hoops to make it happen. How about reducing the overall sales tax rate?
If a politician is proposing a sales tax holiday it is likely because (a) they want to be able to claim to be a tax cutter, but (b) they don’t actually want to cut taxes that much. Voters should not view sales tax holidays as anything but a gimmick designed to appease them and reduce the demand for real tax reform or tax reductions.
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