Sales Taxes Could Be Going on Holiday in Massachusetts

July 26, 2011

According to this morning’s state tax headlines (subscription req’d.), Massachusetts Senate Majority Whip John Hart (D) has proposed a sales tax holiday for the fast approaching weekend of August 13th and 14th. It seems that state budget projections are looking rosier than expected, and Sen. Hart is looking to lighten the tax burden of his fellow Bay State residents for two days.

While I’m sure his heart is in the right place, the Senator seems to have somehow missed the message of our most recent Tax Foundation Special Report, “Sales Tax Holidays: Politically Expedient but Poor Tax Policy.” The authors explain that short-term tax holidays create compliance burdens for businesses and administrative costs for revenue officials without actually stimulating new economic activity. Additional purchases made during holiday periods tend to be ones that consumers would have made in any case, just time-shifted to the tax-free dates.

Mark Robyn, Joseph Henchman and Micah Cohen sum up the trouble with the tax holiday model:

Despite their political popularity, sales tax holidays are based on poor tax policy and distract policymakers and taxpayers from real, permanent, and economically beneficial tax reform. Sales tax holidays introduce unjustifi­able government distortions into the economy without providing any significant boost to the economy. They represent a real cost for busi­nesses without providing substantial benefits. They are also an inefficient means of helping low-income consumers and an ineffective means of providing savings to consumers.

More information on sales and use taxes available here.

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