Posted by Wesley Tharpe
The thousands of Georgians who will head to shopping centers this weekend for the two-day sales tax holiday on back-to-school items will be getting much less than they bargained for. Despite all the media coverage of excited families stocking-up and elected officials patting themselves on the back for the politically popular “tax cut,”sales tax holidays are simply a bad deal for all involved—they provide minimal benefits to consumers, over-burden businesses, and at a cost of $40 million, divert scarce resources from investments that could provide a real boost to Georgia’s economy.
Sales tax holidays like this weekend’s exclude consumers who may not be able to time their shopping to a certain day or two because they live paycheck to paycheck, as well as seniors and others who could use help but have no back-to-school needs, as the widely respected Institute on Taxation and Economic Policy recently pointed out. Nor is there evidence to back supporters’ arguments that sales tax holidays boost sales of other goods and attract shoppers from neighboring states, according to a study by Georgia State University’s Fiscal Research Center.
The conservative Tax Foundation agrees they’re simply a bad idea: “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.”
Lost revenue is the biggest problem. Georgia’s sales tax holidays will cost the state an estimated $40 million per year, a sizable chunk of revenue that lawmakers could put toward schools, job training and health care. For example, $40 million could insure about another 100,000 kids through PeachCare, or cover the salaries of hundreds of new teachers to help shrink class sizes and turn around our schools. It could also kick-start Georgia’s post-TSPLOST transportation needs, or begin reversing the bone-deep cuts to unemployment insurance.
In short, Georgia has more pressing needs than an ineffective tax holiday. Eliminating the scheme and investing those funds in ways that truly strengthen our economy would give a much better deal to Georgia businesses and families.