As Florida prepares for another sales tax holiday, a national tax group calls the tax breaks “politically expedient but poor tax policy”

by | Jul 29, 2019

Florida shoppers will flock to stores later this week as they look to take advantage of the state’s annual sales tax holiday on back to school supplies

Beginning at 12:01 a.m. Friday and running through 11:59 p.m. next Tuesday, shoppers will be able to buy clothes and shoes, school supplies and computer equipment without paying sales taxes.

The tax holidays are very popular among both shoppers and retailers, who see the tax break as  a good opportunity for people to shop small and support the local economy.

“The sales tax holiday, combined with the usual back-to-school sales, really puts people in the mood to shop,” said Bill Herrle, Florida executive director of the National Federation of Independent Businesses, the nation’s leading small business advocacy organization. “We’re reminding everyone that the sales tax holiday applies to Main Street as well as the mall.

This year’s holiday will allow shoppers to avoid paying sales taxes on clothes and shoes costing $60 or less, school supplies costing $15 or less and personal computers and accessories costing $1,000 or less.

“Even if you don’t need to shop for school, you’ll still save money shopping during the sales tax holiday, and you’ll find great deals and unique merchandise by shopping small,” Herrle added.

But some tax policy think tanks question the effectiveness of the sales tax holidays that 16 states will offer its residents this year. That’s down from 19 states in 2010.

“Sales tax holidays are wasteful, misguided policies that will drain more than $300 million of funding away from shared priorities like schools, roads, and health care this year in 16 states, while delivering little benefit to the families that could most use the help,” said a report released earlier this month by the Institute on Taxation and Economic Policy, which calls itself  a non-profit, non-partisan tax policy organization. 

The report points out that most of the 16 state tax holidays that will be held this year place limits on the purchase price of qualifying items and they all share the same basic issues:

“They are not targeted to the people who need them most, they drain away funding needed for state and local priorities like schools and roads, and they are wasteful distractions compared to policy options that would truly benefit typical families while boosting state economies and improving upside-down tax codes. Sales tax holidays do none of these things.”

Another tax policy organization, the Tax Foundation, which calls itself the nation’s leading independent tax policy nonprofit, released a report last week that is also critical of sales tax holidays.

The report, entitled Sales Tax Holidays: Politically Expedient but Poor Tax Policy, 2019, calls sales tax holidays “political gimmicks” that  “distract policymakers and taxpayers from genuine, permanent tax relief. If a state must offer a “holiday” from its tax system, it is an implicit recognition that the state’s tax system is uncompetitive. If policymakers want to save money for consumers, they should cut the sales tax rate year-round.”

The Tax Foundation’s report says sales tax holidays do not promote more economic growth, but simply shift the timing of purchases while creating complexities for tax code

“Despite their political popularity, sales tax holidays are based on poor tax policy and distract policymakers and taxpayers from real, permanent, and economically beneficial tax reform,” the Tax Foundations report concludes.

“Sales tax holidays introduce unjustifiable government distortions into the economy without providing any significant boost to the economy,” the report goes on to say. “They represent a real cost for businesses without providing substantial benefits. They are also an inefficient means of helping low-income consumers and an ineffective means of providing savings to consumers.”

But some states like Florida are looking to expand the sales tax holiday idea by allowing businesses to permanently “absorb” the sales tax for consumers.

“NFIB will be advocating for legislation in 2020 that would give businesses the option of paying the sales tax on behalf of their customers, the Legislature would help brick-and-mortar merchants and manufacturers compete with online stores,” Herrle said. “Best of all, sales tax absorption would have no financial impact to the state.”


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