IL, MA Back-to-School Sales Tax Holidays Are Bad Tax Policy

July 9, 2010

Illinois Gov. Pat Quinn recently signed into law the state’s first retail sales tax holiday, which waives the state’s 6.25% general sales tax rate from Aug. 6-15 on clothing and school supplies that cost less than $100. As we’ve discussed on this blog before, sales tax holidays are poor tax policy. The Chicago Tribune reports:

The Illinois Department of Revenue has posted on its Web site a detailed list of what’s included and what’s not. Neckties and rainwear are in; barrettes and briefcases are out. Glue and pens get the break, but clay and watercolors do not.

Computer accessories and sporting goods are not eligible, even though lawmakers this spring had billed those items as being part of the measure.

The Massachusetts House of Representatives also recently approved a sales tax holiday weekend from Aug. 14-15 waiving the state’s 6.25% sales tax.

A Tax Foundation special report released last summer, “Sales Tax Holidays: Politically Expedient but Poor Tax Policy,” explains that the temporary, targeted periods of sales tax exemption are nothing more than political gimmicks that do little to help consumers. Instead, the holidays distort consumer choices while favoring certain industries over others, increase tax code complexity, and distract from real, permanent tax relief.

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