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1 Scott Drenkard & Joseph Henchman, Sales Tax Holidays: Politically Expedient but Poor Tax Policy 2015 1 (2015)

handle is hein.taxfoundation/sltxhopex0001 and id is 1 raw text is: FOUNDATION Sales Tax Holidays: Politically SPECIAL Expedient but Poor Tax Policy 2015 REPORT Aug. 2015 By Scott Drenkard & Joseph Henchman No 229 Director of State Vice President, Projects Legal & State Projects Key Findings * 18 states, primarily in the southeastern U.S., will hold a sales tax holiday in 2015, down from a peak of 19 states in 2010. Sales tax holidays do not promote economic growth or significantly increase consumer purchases; the evidence shows that they simply shift the timing of purchases. Some retailers raise prices during the holiday, reducing consumer savings. Sales tax holidays create complexities for tax code compliance, efficient labor allocation, and inventory management. However, free advertising for what is effectively a paltry 4 to 7 percent sale leads many larger businesses to lobby for the holidays. Most sales tax holidays involve politicians picking products and industries to favor with exemptions, arbitrarily discriminating between 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. The Tax Foundation is a 501(c)3) non partisan, non-proft research institution founded in 1937 to educate the public on tax policy. Based in Washington, DC, our economic and policy analysis is guided by the principles of sound tax policy: simplicity, neutrality, transparency, and stability. (02015 Tax Foundation Distributed under Creative Commons CC-BY NC 4.0 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 a sign 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. Editor, Melodie Bowler Designer, Dan Carvajal Tax Foundation 1325 G Street, NW, Suite 950 Washington, DC 20005 202.464.6200 taxfoundation org

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