States say “bah! humbug!” to sales tax holidays

Many back-to-school shoppers used to be able to count on sales tax holidays at this time of year. But more states are disappointing them by rejecting or cutting back on the small tax breaks, as they seek more and steadier revenue to keep budgets balanced.

Massachusetts lawmakers this year decided not to give shoppers a late summer holiday from having to pay the state’s 6.25 percent sales tax on items with a price tag under $2,500 — as it had in recent years. Legislators did so in the face of a budget deficit that has been projected to be as high as $1 billion.

Florida legislators trimmed the state’s back-to-school tax holiday this year from 10 days to three and limited the tax break to purchases of clothing under $60 and school supplies under $15. Louisiana trimmed shoppers’ holiday savings by saying they had to pay 3 percent on their purchases this year instead of giving them the full 5 percent break.

Efforts to revive North Carolina’s holiday, which was scrapped two years ago, failed this year. And legislators in Kansas, Maine, Nebraska, Rhode Island and Wisconsin have rejected proposals for new back-to- school tax holidays.

The backpedaling reverses a trend of providing tax-free shopping days that dates to 1980, when Ohio and Michigan eliminated the sales tax on automobiles as a way to boost sales during a recession and get people to buy American cars, many of which were produced in those states.

At one time or another, about 20 states, mostly in the South, have experimented with granting holidays, with a peak of 19 states in 2010.

Traditionally, states’ sales tax holidays tend to coincide with the start of the new school year. But some states have lifted taxes on items far beyond backpacks and notebooks.

Several states, including Maryland, Missouri and Virginia, have separate holidays for energy-efficient appliance purchases.

Others, including Louisiana and Mississippi, have holidays for firearms and hunting supplies.

States in the Southeast also have had holidays before hurricane season begins in June on purchases of emergency supplies.

Retailers love sales tax holidays, because they come with built-in advertising campaigns to encourage shoppers to turn out and spend.

But while retailers have persuaded legislators that the feel-good tax breaks are good for the economy, studies have shown otherwise.

States bordering other states with tax holidays see their own as a way to stem the flow of consumers across state lines.

And lawmakers love a tax cut, especially when short-lived.

Florida, which has no state income tax and relies more heavily on the sales tax than many other states, has found tax holidays to be a way of giving its taxpayers a break while other states are cutting income taxes.

But Scott Drenkard of the nonpartisan Tax Foundation says the holidays are nothing but “gimmicks.”

“Policymakers are telling their taxpayers, ‘We did something for you this weekend.’ It’s politically expedient, but poor tax policy.”

If governors and legislatures really want to make a difference for taxpayers, Drenkard said, they should implement “365-days-a-year” tax changes.

The Tax Foundation and other opponents say the holidays don’t help retailers because buyers simply “shift” purchases they were going to make any way.

They don’t help lower-income people much either, according to the left-leaning Institute on Taxation and Economic Policy (ITEP).

“Wealthier taxpayers are often best-positioned to benefit from the holidays since they have more flexibility to shift the timing of their purchases to take advantage of the tax break — an option that isn’t available to families living paycheck to paycheck,” the ITEP said in a policy paper last month.

“Absolutely vital”

The holidays do cost state and local treasuries money — more than $300 million this year, the ITEP estimates.

IN CATOOSA COUNTY, this year’s July 30-31 back-to-school tax holiday might have helped shoppers while at the same time costing them money.

Chief financial officer Carl Henson said that while LOST and SPLOST revenue for June 2016 was flat compared to the prior year, that