The much ballyhooed Arkansas "sales tax holiday" — spun as a back-to-school boon — is this weekend.
Time again for a reminder that none other than the Republican-beloved Tax Foundation has scoffed at the idea of sales tax holidays. Politically expedient, but poor tax policy, it says.
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. Sales tax holidays introduce unjustifiable government distortions into the economy without providing any significant boost to the economy. 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.
They are hard to administer, too. Imagine programming registers for the items that do and don't qualify. I suspect auditing of the process isn't rigorous. The regressive nature of the sales tax plays out on the spending end, too. The rich can spend more, thus benefit more.
Just so you'll know, here's the state list that outlines what qualifies and what does not. Back-to-school holiday items include
* Jewelry (items costing less than $50, a limit at least one "holiday"-promoting jewelry merchant I've heard about apparently missed.)
* Garters and garter belts.
* Cosmetics (up to $50 per item)
* Sunglasses (non-prescription)
* Wedding apparel (no Vera Wang except from Goodwill, $100 per item limit)
* Formal wear (also a $100 per item limit)
* Ear muffs (will we ever need these in Arkansas again?)
Arkansas doesn't currently have a tax holiday for guns, as some other jurisdictions do. Please, nobody tell Nate Bell.
UPDATE: Another website points out also that wise shoppers can often do better by shopping at sales times — when items are 10, 15 and 20 percent off — rather than settling for the state 6 percent sales tax savings. (Dare I also say that many of these goods can be bought year-round on the web with no sales tax unless voluntarily remitted by the purchaser.) This website is not pro-tax, though it notes the tax holidays deplete state revenues forcing states to find the money elsewhere. It urges, instead, a lowering of the sales tax rate year-round. Hard to do that when a signficant number of legislators are yammering for repeal of the income tax.