A new Citizens for Tax Justice report takes the shine off this idea a bit, noting a few fairly important reasons why a tax holiday might be not the right answer for America at this time.
- As with state sales tax holidays, it's hard to know whether the benefits would go to consumers or retailers.
- To the extent consumers would be better off, the savings would go to even the very best-off families. No effort could be made to target these savings to families hit hardest by the current downturn.
- Even if Congress likes the idea, that's not enough to implement it. Every state with a sales tax would have to pass legislation to make this work. And then every retailer in these sales-tax states would have to train workers and program computers to stop collecting state sales tax (but keep collecting local sales tax) during the holidays.
- Since the first proposed tax holiday would take place in March, the immediate effect of such a plan would be to... encourage people to spend less money right now, and wait until March. Which is an odd feature in a stimulus plan.
The CTJ report is here.