Sales tax holidays – “put that money somewhere else”

sales tax holidays TAX FREE Rubber StampThe Washington Post recently featured an article that looked at the pros and cons of sales tax holidays, which 16 states have. Their overall conclusion is that these policies do not accomplish any of their purported objectives (stimulate the economy or make things cheaper for people who need a break). The Post concludes, “But that argument [the sales tax holidays help retailers slightly] can’t rebut one simple point: The state can do a lot more good if its leaders put that money somewhere else.”

Tax expenditures (such as tax credits, breaks and “holidays”) are a form of public spending, and as such they should be evaluated against other potential public investments in education, infrastructure, parks, etc. Unfortunately, they rarely are. It’s high time we recognize that tax breaks have costs, and we need to ask ourselves if the tradeoffs are worth it.

 

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