Report calls for end to popular back-to-school sales tax holiday

There are politically unpopular stands, and then there’s a call to end the back-to-school sales-tax holiday going on right now.

In other words, really politically unpopular stands. Not quite akin to raising income taxes or outlawing beer sales on the weekend, but pretty unpopular.

It's Happy Days for back-to-school shoppers. Would lawmakers kill the sales tax holiday next year?

It’s Happy Days for back-to-school shoppers. Will lawmakers kill the sales tax holiday next year?

The left-leaning Georgia Budget and Policy Institute has seldom been shy about taking politically unpopular stands, and that’s exactly what the group’s tax expert, Wesley Tharpe, did Friday as shoppers hit the stores to buy tax-free back-to-school clothes, backpacks, etc.

The tax holiday was started in the early 2000s and has long been a way for lawmakers to point out all the help they are giving families. It was discontinued briefly when the state was feeling the crushing financial weight of the Great Recession and couldn’t afford it, but it’s been back ever since.

Tharpe argues that it’s too expensive for a state that still includes “austerity cuts” in school funding budgets, that it provides minimal savings to consumers and that it doesn’t really boost the economy since parents are going to buy back-to-school items whether they get a break on sales taxes or not.

Tharpe says the holiday, which at least 17 states have,  costs the state treasury around $40 million a year and local governments another $30 million.

“In contrast to the cost in lost revenue and potential cuts in services, sales tax holidays provide little direct benefit to consumers,” he wrote in his tax blog Friday. “Most families don’t take advantage of the holidays, and the savings for those that do is minimal unless they spend a great deal of money.

“In some cases families may not be getting as good a deal as advertised, since evidence suggests retailers tend to bump up prices during the event. One study in Florida discovered that up to 20 percent of the price cut consumers thought they were receiving from the state’s sales tax holiday was actually reclaimed by retailers.”

Tharpe added, ” Lawmakers would be smart to make 2015 the last go-round of this particular Georgia tradition. Policies like investing more in K-12 schools, supporting quality child care or enacting a state Earned Income Tax Credit could deliver a much better bang for the taxpayers’ buck.”

Lawmakers who write the state budget have privately echoed many of the points Tharpe makes. But they also tout the sales tax holiday to let colleagues know they can go home and tell constituents they are doing something to help them save a little money.

While the possibility of ending the holiday has been discussed off and on for years, the 2016 session may not be the most politically ideal time for folks like Tharpe to push the idea.

All 236 members of the House and Senate are up for re-election, and the state’s tax collection picture is brighter than it’s been since before the Recession. Around this time next year, lawmakers aren’t going to want to have to explain why they eliminated $70 million in potential tax savings to back-to-school shoppers.

Consumers may not notice. But in an election year,  lawmakers may think like the mob boss Remo in Casino. When asked whether or not the mob should whack a guy that his fellow bosses are convinced won’t snitch, Remo shrugs,  “Why take a chance?” (The guy gets whacked). Even if they support doing away with the holiday, lawmakers may not want to take a chance that Georgians will notice come August 2016.

 

 


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