As parents gear up to send children back to school this fall and economic uncertainty looms overhead, several states are reconsidering their August sales tax holidays. Despite their political appeal, back-to-school sales tax holidays are inherently flawed. Low-income taxpayers often do not have the luxury to time their purchases around these holidays. This is probably even more true during a period of higher gas prices, inflation and a faltering economy. States not only lose a great deal of income but must also work closely with retailers to ensure that the complicated provisions are carried out smoothly and correctly.
The Massachusetts legislature voted this week to continue the recent tradition of a back-to-school sales tax holiday for August 16th and 17th. Although initially reluctant to do so in the face of a faltering economy, lawmakers justified their approval of the holiday by continually calling it a "shot in the arm" for small business. But the fact is, a large majority of these purchases will be made regardless of the sales tax break. Back-to-school shopping occurs year in and year out; a weekend-long incentive is not going to change that nor is it going to stimulate the economy. And the cost to the state will amount to an estimated $16 million at a time when Massachusetts, like so many other states, faces a budget shortfall. A recent Boston Globe editorial blasted lawmakers for making such an irresponsble choice.
Floridamade a rare responsible policy decision in choosing not to have a sales tax holiday this year. State lawmakers acknowledged that because their tax system is in such sad shape, they cannot afford the annual back-to-school sales tax holiday and have decided not to enact it this year. Rep Keith Fitzgerald (D-Sarasota) explains that the "little holiday amounts to a significant amount of money" that is not available in the Sunshine state's already atrocious budget. Meanwhile, many retailers are competing to offer generous mark-downs, knowing that parents will go back-to-school shopping regardless of a tax break and that business will not be harmed by the scrapping of the holiday