Sales-Tax Holidays: Good or Bad?

[kaminisingh]

I wanted to get your opinion of the back-to-school sales-tax holidays. Sixteen states offered the breaks to taxpayers this year, the last of which is Connecticut, whose sales-tax holiday is underway and lasts through August 23. In South Carolina, for example, clothing, clothing accessories (hats and scarves), footwear, computers, and computer accessories (printers and software) were among the items exempted from the state's sales tax from August 1-3.

Proponents of the sales-tax holidays say they improve sales for retailers, create jobs, and promote economic growth. Detractors believe the tax-free weekends are nothing more than good campaign fodder for politicians and do not boost sales nor create economic growth. In a blog for TaxVox earlier this week, Richard Auxier, a research associate with the Urban Institute, wrote that while sales-tax holidays make sense in some situations, they are generally bad tax policy.

"While ostensibly a tax break to help working families afford the costs of sending kids back to school, the holidays are more beneficial to affluent shoppers, who have the means to change the timing and amount of their purchases," he noted. "And because consumers are mostly shifting (rather than increasing) their purchases, the holidays do little (if anything) to boost economic growth."

So, do you believe the back-to-school sales-tax holidays have any merit? Why or why not?

 

[bklynboy]

Any time there are less taxes is good - states and government already tax too much in the US and do a poor job with the taxes raised.

 

[Samir]

I've seen these holidays boost shopping at times when they otherwise would have been normal. But it's a good point that maybe that boost is because purchases are being shifted towards that time, like black Friday in November of each year.

From an accounting standpoint, it sucks. Making systems forget to charge sales tax for one day usually means changing something that is not usually changed in the system. And if someone forgets to switch it back, a retailer can lose thousands in having to pay taxes out of pocket on purchases that are not taxed on a day when they should be.