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July 26, 2010; Source: Bloomberg Businessweek | If the Tax Foundation keeps issuing reports like the one earlier this week, it will soon be as popular with the public as the Grinch who stole Christmas. According to Bloomberg Businessweek, the foundation says that sales-tax holidays offered in some 18 states during the back-to-school shopping season are nothing more than “gimmicks to win political points for lawmakers.”
The foundation also claims that when states temporarily suspend state tax collections, the move doesn’t help economic growth or significantly boost consumption. In a statement, the foundation said, “If lawmakers want to cut taxes, they should do so in a way that benefits everyone, no matter what they purchase or when they purchase it. Unfortunately, sales-tax holidays only distract from genuine, permanent tax relief.”
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The report also questions the wisdom of sales-tax holidays during a time most states are facing declining revenues. For instance, the report noted that Georgia canceled plans for a holiday this year because of a $2 billion deficit. In past years, Georgia had offered a sales-tax holiday for school supplies, energy-efficient products and water-efficient merchandise.
Despite the fact that fiscal 2010 was the worst in Illinois’ history, its governor signed legislation earlier this month that waives the 5 percent the state collects on school supplies during a week in August. Although sure to be popular with shoppers, is this a smart move? “We don’t know what the budgetary impact will be,” Susan Hofer, a spokeswoman for the Illinois Department of Revenue, said. “We’ll analyze the results when the holiday is over.”—Bruce Trachtenberg
