NCPA - National Center for Policy Analysis

States Follow Different Paths On Sales-Tax Holidays

August 9, 2002

Even while scrounging for revenues to balance their budgets, some states are still launching sales-tax holidays -- while others are abandoning that relic of the booming 1990s.

  • As back-to-school shopping season begins, seven states -- New York, West Virginia, North Carolina, South Carolina, Georgia and Texas -- and the District of Columbia are suspending sales taxes for a limited period, and only on certain merchandize.
  • But Florida, Maryland and Pennsylvania decided not to have tax-exempt periods this year.
  • At least 16 other states -- ranging from Kansas to California -- considered but failed to pass a holiday this year.
  • Connecticut, South Carolina and others declined to expand existing ones.

State tax administrators concede the holidays' net effect on revenues is hard to measure. Economists challenge one of the holiday proponents' main arguments -- that any lost revenue is largely offset by increased spending on both exempt and nonexempt items purchased during the exemption period.

Experts think the states will reinstate the holidays once state finances recover, since they are extremely popular with both shoppers and politicians.

Source: Ken Gepfert, "Facing Tight Budgets, States Reconsider Tax Holidays," Wall Street Journal, August 9, 2002.

 

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