Original Post
August 7, 2011
by Eleanor Kennedy
Shoppers flocked to stores Saturday for sales tax holidays in both North and South Carolina.
For Shon Clark, it's the best time to shop. The Concord resident and father of four spent close to $300 at Northlake Mall in Charlotte to get his children ready for school and treat himself to a few items he said he normally wouldn't buy.
"It benefits people with kids," Clark said. "It's been a great shopping experience."
Cathy Gallagher of Concord wasn't shopping for any back-to-school items, but she still came out for the weekend deals.
"I definitely ... try to take advantage of it," she said.
While shoppers like Clark and Gallagher enjoyed their savings, some critics question the weekend's value.
The N.C. Department of Revenue estimates it will lose $14.5 million in sales taxes over the weekend. Although that's not a lot of money compared to the state's $19 billion budget, Meg Wiehe, the state policy director for the Institute on Economic and Tax Policy in Washington, D.C., says it's money the state may need.
"One could argue that every little bit matters," Wiehe said, citing cuts to early childhood education and Medicaid in the state's most recent budget.
Some shoppers agree with the critics' arguments. Steve Walker of Belmont used the tax-free weekend to do most of his son's back-to-school shopping. But even though he's happy about the money he saved, he says he's not sure tax holidays are good for the state.
"Right now, where we are, it's probably not a good idea to be having these things," Walker said.
Critics also say the weekend doesn't do enough to help those hurt most by taxes.
The tax holiday is "not effective at addressing fundamental problems with our revenue system," said Alexandra Sirota, director of the N.C. Budget and Tax Center in Raleigh.
"Because it's offered to everyone, (the tax holiday) really doesn't address the fact that low-income people pay more of their income in sales tax," Sirota said.
Sirota and others say targeted relief programs - like the state earned-income tax credit, which returns some taxes to low-income individuals and families - are more effective ways to relieve the tax burden on low-income families.
"There's a right way to cut taxes and a wrong way," said Mark Robyn, an economist at the Tax Foundation in Washington, D.C., adding that besides being overly broad, sales tax holidays can be complicated for businesses.
"Sales tax holidays are the epitome of bad tax policy," he said.
The Tax Foundation reported that 17 states will hold tax holidays in 2011, down from 19 last year. N.C. Sen. Richard Stevens, R-Wake, recently suggested the state might not want to continue the program.
But analysts say it's unlikely the weekends will end.
"It's good politics," Robyn said. "Politicians like anything that's very visible, very tangible, that people can experience."
N.C. Rep. Ruth Samuelson, R-Mecklenburg, said in an email that tax-free holidays help pump money into the economy.
"These holidays show us that tax rates have an impact on spending behavior," Samuelson said. "Lower the rate and people spend more."