Report: Permanent tax cut would do more to boost economy than sales tax holiday.


  

There are 17 states that usually have annual tax holidays. Mississippi’s begins at 12:01 a.m. July 31 and ends at midnight Aug. 1. According to the Mississippi Department of Revenue, items exempt from sales tax during the holiday are identical to previous years: clothing and footwear items less than $100 per item. Accessories, athletic equipment, school supplies and computers are not eligible.

Sales tax holidays are advertised as a way to give people a break from paying the sales tax, typically during the “back to school” shopping season. Superficially this sounds good, however, many tax and economic experts and officials believe the benefits are minimal. They say public officials cash in more on the good publicity than consumers cash in on savings.

According to a report from the Institute on Taxation and Economic Policy, sales tax holidays are poorly targeted and too temporary to meaningfully change the regressive nature of a state’s tax system.

“While ostensibly a tax break to help working families afford the costs of sending kids back to school, the holidays are more beneficial to affluent shoppers, who have the means to change the timing and amount of their purchases,” reads a publication from taxvox.taxpolicycenter.org. “And because consumers are mostly shifting (rather than increasing) their purchases, the holidays do little (if anything) to boost economic growth.”

According to ITEP and other sources, the rationale that sales tax holidays increase local consumer spending has not been demonstrated. Most “increases” in sales are shown to be the result of consumers’ shifting planned purchases.

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2 Comments

Filed under Taxes

2 responses to “Report: Permanent tax cut would do more to boost economy than sales tax holiday.

  1. Pingback: Mississippi Sales Tax Holiday Leaves Some Asking, Why Not a Permanent Tax Cut? | DeSoto County Reform

  2. Basically, people defer spending to the tax free season if they can.

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