First state back-to-school sales tax holiday kicks off at end of July

It may seem like just yesterday the kids had their last day of classes for the summer, but three states this weekend are holding their annual back-to-school sales tax holiday: Georgia, Tennessee and Mississippi.

Indeed, “[o]ver the next month, 17 states — primarily in the southeastern U.S. — will hold so-called sales tax holidays,” Time magazine reported Thursday, cautioning that each state has “its own rules on what counts as tax free, and whether the exemption applies to multiple item buys, rain checks, layaways, and back-ordered stock.”

Most states, for example, do not tax back-to-school clothing so long as it’s less than $100 in value, but South Carolina has no such spending limit and the state of Louisiana’s August 5-6 tax holiday applies to “most goods priced at $2,500 or less.”

While sale-tax holidays may prove enticing to some parents, tax-policy think tanks on both the left and right question their wisdom.

The conservative-leaning Tax Foundation argued in a July 22 study that it’s a “political gimmick” that amounts to poor public policy.

“Sales tax holidays introduce unjustifiable government distortions into the economy without providing any significant boost to the economy,” said the Tax Foundation. “They represent a real cost for businesses without providing substantial benefits. They are also an inefficient means of helping low-income consumers and an ineffective means of providing savings to consumers.”

For its part, the liberal Institute on Taxation and Economic Policy in a July 11 policy brief likewise questioned the propriety of sales tax holidays, concluding they do little to help the working poor, result in less tax revenue and administrative headaches for state tax collectors and provide an opening for “unscrupulous” merchants to “increas[e] their prices or water[]-down their sales promotions during the tax holiday.”