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Consumers in 16 states this year will be given the opportunity to participate in a sales tax holiday (most of which will happen this weekend). These so-called holidays are a temporary break on paying sales tax on purchases of clothing, computers and other select items. These holidays are normally heavily promoted, but really they aren’t worth the hype. Sales tax holidays are poorly targeted, costly and represent a lost opportunity to get tax fairness right.
Sales tax holidays are advertised as a way to give people a break from paying the sales tax. On the surface, this sounds good given that sales taxes fall most heavily on low-income families. However, a two- to three- day sales tax holiday for selected items does nothing to provide relief to low- and moderate-income taxpayers during the other 362 days of the year. In the long run, sales tax holidays leave a regressive tax system basically unchanged. For more on why sales tax holidays aren’t all they’re cracked up to be, read ITEP’s brief “Sales Tax Holidays: An Ineffective Alternative to Real Sales Tax Reform.”