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 a way for politicians to look like they are cutting taxes without really cutting them. In addition, if only certain items are exempt, it can confuse consumers while giving politicians the power to pick winners and losers (e.g., what products “deserve” favorable 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. treatment). From the Augusta Chronicle:
For two days after Thanksgiving, shoppers in South Carolina will be able to buy guns tax-free, but some say it’s a political gimmick that only complicates the tax code.
The bill that created this sales-tax holiday, which was vetoed by the governor but overridden by lawmakers, also created a month-long exemption for next October for energy-efficient dishwashers, ceiling fans and other home products.[…]
Bryan Cox, a spokesman for the South Carolina Policy Council, said the holidays distract from meaningful tax reform.
Besides, “If we all agree lower taxes promote economic growth, let’s support lower taxes all year round,” he said.
The South Carolina government estimates that the Nov. 28-29 tax holiday will save taxpayers a measly $15,000. In a state where the average 6.84% sales tax raises over $2.6 billion, and where citizens purchase something like 1,000 guns a week, $15,000 is a rounding error.
Check out the full article for more quotations from me about sales tax holidays. Surprisingly, the sponsor admits the holiday is basically a political gimmick and he’d rather see broad-based tax reform. We’ll be waiting!
UPDATE: BNA reports more criticism of this politically-motivated tax policy change:
Share this articleLike most sales-tax-holiday advocates, backers say the sales tax break will give a boost for consumers and help stimulate the economy a bit. But opponents — some of whom are against all sales tax holidays, regardless of purpose — call this tax break an even bigger gimmick that complicates the tax system and won’t save shoppers much cash in the long run.
“If the sales tax is too high, they should lower the tax rate year round, not just on holidays,” said Joseph Henchman, tax counsel for the Tax Foundation. “If they think there’s a shortage of guns in South Carolina, they should set up government programs and let them compete for funds.”
Henchman said he is opposed to any 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. because it puts government in the position of picking winners and losers. For example, a sales tax holiday on clothes benefits retailers, but not necessarily any other businesses.[…]
The South Carolina Policy Council, a fiscally conservative think tank, opposed the gun sales tax holiday for this reason, said spokesman Bryan Cox.
“This is a symptom of a problem we have; there will always be pet projects that individuals support,” Cox said. “If we allow lawmakers to tinker with the tax code for everything they support at the expense of those they do not, we’ll end up with what we have now, which is an absurdly complicated tax code.”