Critics Attack ‘Tax-Free Holidays’

HUNTSVILLE, Ala. (WHNT)  A tax watchdog group is attacking the sales tax holiday like the one in Alabama this weekend, calling it a political gimmick.

In a report released this month by the Tax Foundation, experts blast the tax holiday concept altogether.

“If the purpose of sales tax holidays is to make school supplies and clothes cheaper for low-income individuals, then a four-to-seven percent price reduction for all consumers, but only for a brief period, is an odd and ineffective way of achieving it. It’s an example of politicians using a fire hose when a garden hose will do a better job,” Tax Foundation Vice President  Joseph Henchman told WHNT News 19 Tuesday.

Tax free holidays are in 17 states this year. They are supported by politicians on both sides of the aisle who say the tax-free days improve sales for retailers, create jobs and promote economic growth.

“Retailers and their lobbyist loves these, they are basically just government supported free advertising for them and it is really just an eight percent off sale,” Henchman said.

Sales tax holidays are periods of time when selected goods are exempted from state (and sometimes local) sales taxes. Such holidays have become an annual event in many states, with exemptions for such targeted products as back-to-school supplies, clothing, computers, hurricane preparedness supplies, products bearing the U.S. government’s Energy Star label, and even guns.

 “A lot of people push the holidays saying they are good way to reduce cost for low-income people and to reduce costs the evidence show that is really not true,” Henchman said.

Henchman found retailers actually lost money because they had to bring in more workers to handle the demand.

 “The real purpose is to allow politicians to say they are lowing taxes really there is nothing of the kind, and it distracts from permanent tax relief,” Henchman added.

In Alabama, local municipalities can opt-out of the sales tax holiday. For a full list of places that are not participating click here.

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