Politics

Though Popular with Voters, Tax Holidays Anathema to Policy Analysts

April 2nd, 2012

Georgia lawmakers recently passed a bill that reinstates a sales tax holiday for school supplies and adds another for energy efficient appliances.

Though popular with voters, conservative and liberal policy experts agree sales tax holidays do more harm than good.

A few years ago, Georgia lawmakers ended the sales tax holiday for school supplies due to tight budget times. With budget projections a bit rosier for the first time in years, the tax holiday is set to be reinstated.

But Alan Essig of the left-leaning Georgia Budget and Policy Institute says it will ultimately hurt consumers by taking away much needed state revenue.

“All we’re doing is changing the weekend that they buy it from, but we’re not changing the amount that is being bought so the state will lose the sales tax revenues which will impact funding for education, for healthcare, for economic development,” Essig says.

Kelly McCutchen of the Georgia Public Policy Foundation, a conservative think tank, agrees.

In terms of the tax holiday on energy efficient appliances, he says consumers should be making purchases based on market incentives, like their own electric bills.

“Philosophically, all of these tax breaks distort economic behavior,” McCutchen says. “You really shouldn’t use the tax code to choose winners and losers.”

If signed into law by the Governor, the tax holiday for school supplies would be in August. The holiday for energy efficient appliances would be in October.