ATLANTA–Thousands of shoppers have been flocking to malls in more than a dozen states for back-toschool sales tax holidays, buying millions of dollars worth of clothes and school supplies — and depriving states of much-needed revenue.
ATLANTA–Thousands of shoppers have been flocking to malls in more than a dozen states for back-to-school sales tax holidays, buying millions of dollars worth of clothes and school supplies — and depriving states of much-needed revenue.
The tax holidays offer a financial relief valve to families grappling with high gas and food prices, and are a welcome tradition among retailers. But some lawmakers, economists—and even some shoppers — are questioning why states are suspending sales taxes amid a slumping economy. Several states have called off the event entirely.
Vanessa Lee of Atlanta snagged six pairs of sneakers and a few dresses for $115 during Georgia’s tax holiday at the start of this month. But the 42-year-old mother of three daughters in elementary school said she would rather have paid the taxes and seen the money go toward education.
“We could do away with the holiday,” Lee said. “I would hate to see our teachers and classrooms lose out on money because the state doesn’t have enough revenue.”
Sixteen states and the District of Columbia hold tax holidays, usually one weekend a year in which clothing, classroom supplies and energy efficient appliances are exempt from sales tax.
“I understand why legislators want to give people a break— because the economy is down and people are hurting and can’t afford the things they want to buy,” said Kim Rueben, public finance economist for the nonpartisan Tax Policy Center. “But they aren’t taking into account what that revenue could later buy for the states.”
Legislators in some states are heeding such advice and may do away with the holidays amid increasing pressure to spend state dollars on bolstering infrastructure or improving schools.
Maryland lawmakers last year put the state’s tax holiday on hold until at least 2010, which could drive the state’s shoppers to Washington and Virginia for tax holidays. And Florida quashed its two tax holidays for hurricane and back-to-school supplies this year.
Politicians in Maryland blamed a mounting deficit that now tops $1.7 billion for suspending the holiday, which cost the state an estimated $5 million in 2006. Even so, legislators seem reluctant to criticize a popular program.
Maryland Del. Charles Barkley, a Democrat, said he supported the holiday because it “gets people out and spending money.”
Florida leaders offered a different reasoning for calling off the holiday, which cost the state an estimated $12 million. State Senate President Ken Pruitt said economists scored it as a loss to the state and said the National Retail Federation failed to prove that consumers would ultimately save money at the register.
“We’ve given them the benefit of the doubt for a long time,” Pruitt said. “They couldn’t show there would be savings for Floridians.”
For advocates, the flagging economy makes the tax holidays more crucial than ever.
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