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 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. policy and more lawmakers should consider eliminating sales tax holidaySales tax holidays are periods 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. s, 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 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. 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.Share