Massachusetts Gov. Patrick Should Say No to Sales Tax Holidays and Focus Instead on Real Tax Relief

Massachusetts may soon be the 19th state to enact a sales tax holiday for 2010. Massachusetts lawmakers have sent a sales tax holiday bill to Governor Patrick’s desk and the Governor has indicated that he will sign the bill. But the Governor would be wise to steer clear of this bill.

The popular but ill-advised policy of offering a temporary break from sales taxes has become more prevalent over the last decade, with 18 states having scheduled at least one holiday in 2010. In a way this makes sense. Politicians love sales tax holidays because it allows them to pass a relatively small tax cut and forever brand themselves with the invaluable “Tax Cutter” stamp. That is not to say that a small tax cut is not worthwhile. But if Massachusetts has the extra room in their budget to afford even a small tax cut it would be much better to give that tax cut to all consumers regardless of when they shop.

The argument that sales tax holidays are a great boon for the economy is wrong. Sales tax holidays mostly shift the timing of purchases that would have occurred anyway. Business will increase during the tax free period, but it will be down in the weeks before and after.

If you have to offer a holiday from your state’s tax system, maybe that is a sign that there are larger problems. Gimmicks like sales tax holidays distract from real, beneficial tax reform. Bay Staters should not be mollified by such policies, but instead should demand that their elected officials make genuine tax reform a priority.