Monday, July 24, 2006

Sales Tax Holidays: Growing in Popularity, but Do They Work?

The District of Columbia and 13 states (all but one east of the Missouri River) are offering some form of exemption from sales tax on selected purchases (usually at least loosely school-related) during the next month or so. Additionally, Massachusetts may join in soon. The most commonly exempted items are clothing, computer software and school supplies with some states also including computer hardware. Proponents claim that the holiday is a boon to cash-strapped parents; critics say that the holiday causes net lost tax revenue.

About the only justification for a sales tax holiday; absent a concurrent reduction in state spending; is indirect support for education. To paraphrase Stanley Surrey--mayhaps direct spending on education (how's THAT for a biased position) may be more honest and efficient.


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