More and more states are offering tax holidays for the purchase of school supplies and other goods, a grouping that is now up to 19 states, according to a new study.
The Denver-based National Conference of States Legislatures has compiled a list of the states enacting such policies for this year. In the sales tax holiday world, the number of states offering such benefits come and go, as does the exact type of consumer goods to be affected.
This year states in the South, including Alabama, Arkansas, Florida, Louisiana, South Carolina, Tennessee, and Texas offering tax holidays for various items.
Only the West comes close currently in the number of states with legal tax holidays: Nevada, New Mexico, and Texas. Iowa and Ohio in the Midwest have seen similar holidays.
While department and clothing stores in such states record a distinct uptick in sales during designated sales tax holidays, not everyone thinks they are fiscally logical.
The Washington-based Institute of Taxation and Economic Policy, for example, recently undertook a study showing that the cost of tax holidays for state and local governments in 2022 was in excess of $1 billion.
That study raised the issue of the regressive nature of such policies, especially as such holidays are implemented as a “substitute for more meaningful, permanent reform” of tax policies.
The origin of such holidays dates to 1980 when both Michigan and Ohio, in trying to bolster lagging automobile sales, decided to not tax the sales of vehicles for a given period of time.
Other tax holidays in Illinois, New York, North Carolina, Vermont, and Wisconsin, have come and gone, depending upon how state lawmakers structured them.
The holidays are also often problematic for businesses, too, notes the NCSL study, observing that the “administrative work required to exempt eligible products from sales taxes can be time-consuming and difficult because the list tends to be very specific and limited to a dollar amount.”
Even so, such holidays appear to be here for the foreseeable future, notes the NCSL study: “Consumers support them and, for now, states continue to enact legislation allowing for multiyear sales tax breaks.”
By Garry Boulard
