July 31, 2013

The Advocate: Sales tax holiday begins Friday

media mention

 

[email protected]
July 31, 2013
State sales tax will take a holiday this weekend, giving consumers a chance to save on the purchases of clothes, appliances, electronics and other goods.
Lifting the 4 percent state sales tax is a tradition that dates to the aftermath of 2005’s Hurricane Katrina, when legislators wanted to help storm victims replenish their households. The August tax holiday stuck as a boost for parents preparing children for the new school year.
“It was a goodwill gesture for the constituents,” state Rep. Joel Robideaux, chairman of the House Ways and Means Committee, said Tuesday.
Gov. Bobby Jindal said in a prepared statement that sales tax holidays are a way to lower taxes.
Economic groups recently offered their own characterizations of sales tax holidays, using phrases such as “poor tax policy,” “inefficient” and “ineffective.”
The Tax Foundation, a national think tank on tax policy, and the Institute on Taxation and Economic Policy, a public research and advocacy group, looked at sales tax holidays this month after seeing that 17 states will hold them this year. The holidays include tax discounts on the purchases of clothing, school supplies, computers and Energy Star products.
Louisiana currently conducts three sales tax holidays a year. They are:
A state sales tax exemption on the first $2,500 in purchase price on many goods from 12:01 a.m. Friday to 11:59 p.m. Sunday. Excluded from the holiday are vehicle and meal purchases as well as taxable services like hotel rooms and entertainment tickets.
A state sales tax exemption on the first $1,500 in purchase price on hurricane supplies. The holiday was held in May ahead of hurricane season starting.
A sales tax exemption on certain days in September for firearms, ammunition and hunting supplies.
The three holidays combined are expected to reduce state government revenue by roughly $4 million.
Sales tax holidays started in 1980 when Ohio and Michigan erased the taxes on automobile purchases. New York created a sales tax holiday for clothing 17 years later to cut down on shoppers hopping over to New Jersey for lower sales taxes.
The Tax Foundation found that the financial bite of the economic recession prompted several states to cancel sales tax holidays, although 17 states still offer some form of them.
After studying the issue, the foundation concluded that sales tax holidays are politically popular but do not provide significant economic benefits.
“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,” the foundation said in a recent report.
Matt Gardner, executive director of Institute on Taxation and Economic Policy, said his organization reached a similar conclusion.
He said lowering the sales tax rate every day of the year is a more straightforward way to benefit families.
“The biggest fans of sales tax holidays are the lawmakers who keep enacting them. They’re relatively cheap and they’re great advertising. Most tax cuts aren’t visible on a day-to-day basis,” Gardner said.
Greg Albrecht, chief economist for the Louisiana Legislative Fiscal Office, said the holidays likely just encourage consumers to circle a different date on the calendar for buying a washer and dryer rather than sparking spending sprees.
“All they’ve done is change the timing. Are you buying more (school) uniforms than you need? Probably not,” he said.
Robideaux, R-Lafayette, said there is an impact, especially when it comes to drawing shoppers from nearby states or discouraging Louisiana residents from going to Texas or Mississippi to do their spending.
He said consumers also sometimes need a push to stock up on supplies that they need.
“For hurricanes, we need to encourage you to get the supplies you need, and if a 4 percent discount does it, in that respect, it serves its purpose,” Robideaux said.

BY MICHELLE MILLHOLLON
[email protected]

July 31, 2013

State sales tax will take a holiday this weekend, giving consumers a chance to save on the purchases of clothes, appliances, electronics and other goods.

Lifting the 4 percent state sales tax is a tradition that dates to the aftermath of 2005’s Hurricane Katrina, when legislators wanted to help storm victims replenish their households. The August tax holiday stuck as a boost for parents preparing children for the new school year.

“It was a goodwill gesture for the constituents,” state Rep. Joel Robideaux, chairman of the House Ways and Means Committee, said Tuesday.

Gov. Bobby Jindal said in a prepared statement that sales tax holidays are a way to lower taxes.

Economic groups recently offered their own characterizations of sales tax holidays, using phrases such as “poor tax policy,” “inefficient” and “ineffective.”

The Tax Foundation, a national think tank on tax policy, and the Institute on Taxation and Economic Policy, a public research and advocacy group, looked at sales tax holidays this month after seeing that 17 states will hold them this year. The holidays include tax discounts on the purchases of clothing, school supplies, computers and Energy Star products.

Louisiana currently conducts three sales tax holidays a year. They are:

A state sales tax exemption on the first $2,500 in purchase price on many goods from 12:01 a.m. Friday to 11:59 p.m. Sunday. Excluded from the holiday are vehicle and meal purchases as well as taxable services like hotel rooms and entertainment tickets.

A state sales tax exemption on the first $1,500 in purchase price on hurricane supplies. The holiday was held in May ahead of hurricane season starting.

A sales tax exemption on certain days in September for firearms, ammunition and hunting supplies.

The three holidays combined are expected to reduce state government revenue by roughly $4 million.

Sales tax holidays started in 1980 when Ohio and Michigan erased the taxes on automobile purchases. New York created a sales tax holiday for clothing 17 years later to cut down on shoppers hopping over to New Jersey for lower sales taxes.

The Tax Foundation found that the financial bite of the economic recession prompted several states to cancel sales tax holidays, although 17 states still offer some form of them.

After studying the issue, the foundation concluded that sales tax holidays are politically popular but do not provide significant economic benefits.

“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,” the foundation said in a recent report.

Matt Gardner, executive director of Institute on Taxation and Economic Policy, said his organization reached a similar conclusion.

He said lowering the sales tax rate every day of the year is a more straightforward way to benefit families.

“The biggest fans of sales tax holidays are the lawmakers who keep enacting them. They’re relatively cheap and they’re great advertising. Most tax cuts aren’t visible on a day-to-day basis,” Gardner said.

Greg Albrecht, chief economist for the Louisiana Legislative Fiscal Office, said the holidays likely just encourage consumers to circle a different date on the calendar for buying a washer and dryer rather than sparking spending sprees.

“All they’ve done is change the timing. Are you buying more (school) uniforms than you need? Probably not,” he said.

Robideaux, R-Lafayette, said there is an impact, especially when it comes to drawing shoppers from nearby states or discouraging Louisiana residents from going to Texas or Mississippi to do their spending.

He said consumers also sometimes need a push to stock up on supplies that they need.

“For hurricanes, we need to encourage you to get the supplies you need, and if a 4 percent discount does it, in that respect, it serves its purpose,” Robideaux said.

 

 


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