A Unique Sales Tax Holiday Proposal in Florida; and Arizona May End Film Subsidies

December 16, 2010

The Florida Retail Federation (FRF) wants a series of sales tax holidays next spring. Pushing for gimmicky sales tax holidays is normal for a retail industry group, but this time there’s a twist: the retailers want the sales tax revenue foregone during the holidays to be made up by BP (estimated at $25 million). Basically, the state would allow the holidays and BP would write the state a check for the cost. Their justification is that the BP oil spill in the spring caused tourism to tank, even if in reality Florida was largely spared from physical damage from the incident. The FRF claims that the holidays could be implemented without legislative approval, as long as BP agrees to pay the taxes on time.

The premise may be true, but it is hard to say whether implementing sales tax holidays will get them what they want. Sales tax holidays generally are poor policy and mostly have the effect of shifting the timing of purchases, rather than increasing total purchases. That being said, the FRF’s goal is slightly different in that they aim to give a boost to tourism. The holidays would apply even to tourist destinations, where previous sales tax holidays had not applied, in an effort to lure back vacationers. Rick McAllister, President and CEO of the Florida Retail Federation, thinks it will help jumpstart tourism, but then he makes this statement:

What keeps me awake at night in regard to Northwest Florida is all those people who went to Myrtle Beach last year instead of going to Destin or Panama City Beach or Pensacola. Did they find something there that they enjoyed so they are going to try it one more year?

It sounds like he is admitting that up until now Florida has been fooling some people into thinking the Sunshine State is the best vacation spot. If that is the case, it seems unlikely that sales tax holidays are a sufficient or sustainable strategy for winning back tourists.

In the continuing debate over film tax credits, there are signs of a step in the right direction in Arizona. Arizona’s Joint Legislative Income Tax Credit Review Committee has unanimously recommended eliminating the state’s movie production incentives. Democratic Representative and committee member Tom Chabin said “I think the arguments for the motion picture credits are weak”. Weak at best. The committee’s recommendation is not binding on the legislature.

The credit is set to expire at the end of the year, and it should expire. If Arizona can get rid of tax expenditures like this and lower their tax rates they would be taking a big step in the direction of sound tax policy.

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