Sales tax holidays are political gimmicks, study finds

Upcoming sales-tax holidays are nothing more than political gimmicks that do little to truly help consumers, states an updated report by the Tax Foundation.

"Sales-tax holidays are gimmicks designed to win political points for lawmakers," said Tax Foundation staff economist Mark Robyn in prepared remarks.

Robyn helped author the study with Tax Counsel and Director of State Projects Joesph Henchman and Adjunct Scholar Micah Cohen.

The sluggish economic recovery has prompted 18 states to offer sales-tax holidays beginning in August. That figure is up from 16 in 2009 and 17 in 2008. The holidays are aimed at boosting back-to-school sales.

The Tax Foundation report finds that sales-tax holidays do not promote economic growth or significantly increase consumer purchases. Such sales merely shift the timing of purchases.

The study also states that most of these holidays involve politicians picking products and industries that can distort which products consumers choose to buy.

"Taxes should raise revenue, not micromanage a complex economy by picking winners and losers in the market," Henchman said in prepared remarks. "If a state must offer a 'holiday' from its tax system, it's a sign that the state's tax system is uncompetitive, something that must be addressed with permanent reform."

Robyn states that permanent tax reform would be a better option to stimulating growth because it would affect everyone, not just shoppers on a given day.

"If lawmakers want to cut taxes, they should do so in a way that benefits everyone, no matter what they purchase or when they purchase it," he said. "Unfortunately, sales tax holidays only distract from genuine, permanent tax relief."