2010 Massachusetts tax holiday details
Happy 149th Birthday, Income Tax!

Tax holidays: Bonanzas or bogus?

The bulk of back-to-school tax holidays begin this weekend, and the debate over whether these events are worth it is heating up, too.

 As I mentioned in my July 27 post on the 2010 tax holidays, many tax and economic experts dismiss the holidays as politically expedient gimmicks that are poor tax policy.

The Tax Foundation, a Washington, D.C.-based nonprofit, says that sales tax holidays don't actually encourage shoppers to buy anything. Rather, shoppers purchase items they would've bought anyway, but on a different day.

The organization held a press conference yesterday to elaborate on its new report on the tax holidays, which it would like to see end.

"Lawmakers like to say there's a big economic benefit from the sales tax holidays, that they boost sales and are a great boom for business and things like that, but it's mostly just an illusion," said Tax Foundation economist Mark Robyn.

In reality, said Robyn, if a business' window is just one week of a so-called tax holiday, "you look at that and say, 'Wow, look at all this business.' But a lot of that business has been stolen from the other weeks."

Plus, from the the strictly tax perspective, the Tax Foundation notes that the holidays create complexities for tax code compliance and that the sales are somewhat regressive, not providing as much savings to lower-income shoppers as advertised.

Still, such arguments tend to fall on deaf ears of politicians, businesses and, most importantly, shoppers.

Enthusiasm for the events is evident in tales from the tax holiday front lines via Channel 10 in Columbia, S.C.; the Palm Beach Post's interviews of retailers and shoppers at the Palm Beach Gardens mall; and in this NPR report.

I'm revising my earlier tax holiday table to include the just-approved Massachusetts event. Look for its posting soon.

Do you take advantage of sales tax holidays? Are you careful to compare prices of items at participating stores? Do you make sure you just buy tax-free items during the holiday period?

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No Refund

No tax day is just a major compliance issue.

If I was the Retailer, I would keep the cash by turning sales into school supplies.

If the tax was expendable, it was too high to begin with.

More tax is less fun.


Kay, since you ask, bogus.
Is there anything I'd buy where a 6% discount would help me make the decision? Some thousand dollar purchase I'd pass on but for $940, I'd go for it? Probably not.
As you surmise - these purchases are probably delayed or pulled in to the tax holiday days, but not extra purchases.
I am close enough to the New Hampshire (zero sales tax) border to drive over when a purchase is large enough.

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