Vermont Governor Praises Economic Inefficiencies of Sales Tax Holidays

July 16, 2008

Gerald Prante

Gerald Prante

More economic ignorance when it comes to sales tax holidays:

Gov. Jim Douglas is praising Vermont’s first two-day sales tax holiday and is hinting he’d support making it an annual event.

It will be months before the full impact of the sales tax holiday are known.

But Douglas says one retailer told him sales last weekend were 20 times what they were a year ago.

And Douglas says waiving the 6 percent tax has a ripple because retailers boost staff, pay overtime and buy advertising and food for shoppers.

Douglas is praising the extra costs that businesses must incur because of the sales tax holiday, arguing that such a cost is an economic benefit. Unbelievable.

Hey Governor, here’s another idea. How about you direct the Vermont Office of Economic Development to drive around Vermont and break every window of every house? Think of all the window repair jobs that would create.

Higher costs do not translate into greater economic well-being.

What’s even worse is that the Maine Heritage Policy Center is buying into this baloney as well, arguing that Maine should pass a similar sales tax holiday, and using the same argument of Gov. Douglas.

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A 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.

Sales tax holidays are periods 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.

A 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.