The principles of sound taxation are few, and rather simple. Broad base, low rate. Easy to understand. Maximum feasible transparency. Don’t pick winners and losers.
That’s why so many economists and policy analysts — right, left, and everything else — agree that sales-tax “holidays” are just plain dumb.
Politicians love ’em, of course. Since New York started the phenomenon in 1997, governors and lawmakers from Florida to Massachusetts, Connecticut to Missouri have approved short-term relief from sales taxes many times. Items exempted include clothing, ENERGY STAR products, food, hurricane-preparedness equipment, and — Mississippi being Mississippi — firearms/ammo.
Sadly, the American Southwest is not immune from the craze. Oklahoma and New Mexico kick off their back-to-school holidays one week from tomorrow, followed by Texas on August 11th. (It will be the third, and mercifully final, exempt-a-palooza for the Lone Star State in 2023.) In October, Nevada will briefly free members of the National Guard and their families from the sales tax.
Effective vote-buying, it gives SPPI no joy to report, rarely makes for wise policy. The Tax Foundation regularly issues blistering critiques of sales-tax holidays. The organization’s latest broadside argues that they
neither promote economic growth nor increase purchases. They create complexities for all involved, while inserting the political process into consumer decisions. By distracting high-tax states from addressing real problems with their tax systems, holidays undermine efforts to provide legitimate relief to consumers in general and low-income individuals in particular.
No taxpayer, of course, should be denounced for taking advantage of a completely legal opportunity to escape the burden of any levy. (Especially when inflation is worse than it’s been in decades.) But as for the decisionmakers in legislatures and governors’ offices, there are ample reasons for condemnation. When Americans for Prosperity and the Center on Budget and Policy Priorities agree, notice should be taken. Kudos to Arizona, Utah, Colorado, and California for taking a hard pass on sales-tax holidays. Oklahoma, New Mexico, Texas, and Nevada should do the same.