by Max Brantley
Sales tax holidays create additional tax compliance costs, but larger businesses tend to lobby for the holidays as a form of free advertising.And never mind all the vagaries of retailing, such as when is a sale really a sale and whether a local purchase, even with the sales tax exemption, is actually cheaper than an alternative source.
Most sales tax holidays involve politicians picking products and industries to favor with exemptions, arbitrarily discriminating among products and across time, and distorting consumer decisions.
While sales taxes are somewhat regressive, this does not make sales tax holidays an effective tool for providing relief to low-income individuals. In order to give a small amount of tax savings to those with lower incomes, holidays give a large amount of savings to higher-income groups as well.
Political gimmicks like sales tax holidays 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, then they should cut the sales tax rate year-round.