Many people are beginning to wrap their minds around the House Republicans’ proposed destination-based cash-flow tax and what it means for tax reform. Most people are still looking into the tax’s impacts on trade and how...
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- Georgia Passes on Back-To-School Sales Tax Holiday
Georgia Passes on Back-To-School Sales Tax Holiday
Georgia's legislature has opted not to renew its back-to-school sales tax holiday this year, citing concerns over the state's $2 billion budget deficit. This is a move in the direction of sound tax policy and more lawmakers should consider eliminating sales tax holidays, regardless of the condition of their state's budget.
Sales tax holidays are a gimmick designed to win political points for lawmakers. Don't be fooled by claims that brief tax holidays boost the state economy. The products typically targeted in sales tax holidays are things people would be purchasing anyway, like school supplies. Indeed, an argument often given is that families need to purchase these items for their children, so we should give them a tax break (more on that in a moment). But if families are going to purchase school supplies regardless of the tax break, the tax holiday provides no overall benefit to the economy through increased sales. Any increase in business during the holiday is largely due to a shift in the timing of purchases (not to mention the natural rush that occurs before the start of the school year), not an overall increase in economic activity.
Still, many might argue that even if there is no benefit to the economy on whole, it is still a tax cut. True, but there are much better ways to implement tax cuts. Why should a family with school children get a tax cut but not a retired couple? If lawmakers want to cut taxes, they should do so in a way that benefits everyone, no matter what they purchase or when they purchase it. Unfortunately, sales tax holidays and other tax gimmicks only serve to distract lawmakers and the public from genuine, permanent tax relief.
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The Tax Policy Blog is the official blog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.
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