A popular policy slashed from the state budget five years ago was good for individuals but neutral or bad for North Carolina as a whole, a new study argues.
A July 25 report from the Tax Foundation think tank says sales tax holidays like the back-to-school tax-free weekend North Carolina eliminated in 2013 “neither promote growth nor increase purchases.”
Authors would praise the Tar Heel State for scrapping its tax-free weekend and pan the 16 states that keep them on the books. They call tax-free shopping days “a gimmick that distract policymakers and taxpayers from real, permanent and economically beneficial tax reform.”
Retailers suffer in the weeks surrounding tax holidays because consumers concentrate their purchases during the designated days when levies are waived, the study explains.
The list of products subject to tax relief can influence consumer behavior, the Tax Foundation notes, using the example of tax-exempt backpacks versus messenger bags that don’t qualify. Will students and parents settle for less stylish wares because the discount makes them cheaper than alternatives that would otherwise be similarly priced?
The study also asserts politics can play a role in making the tax-free list, with lawmakers giving a leg up to favored industries. That seems farfetched for a back-to-school tax break — we’ve heard of Big Tobacco and Big Oil, but is there really such a thing as the Big No. 2 Pencil lobby?
Analysts from the Tax Foundation have given us some food for thought, but we aren’t ready to give up on the tax-free weekend’s return. The Times has long favored the tax holiday. We continue to do so for two reasons — necessity and competition.
Nearly one in four North Carolina children are considered food-insecure, according to federal and state figures. For parents who struggle to provide sustenance, backpacks, school supplies, new clothing and computers are a luxury. Taxing these back-to-school staples is a slap in the face.
While we’re sure some shoppers with above-average incomes took advantage of the tax-free weekend, it primarily benefited low- and middle-income families. Saving 7 cents on the dollar is a bigger deal to folks who are scraping by than those who can comfortably afford full-priced goods.
Wealthy people tend to steer clear of stores on tax-free weekends because for them, the savings don’t outweigh the harangue of fighting crowds and standing in long lines. When money is no object, shopping is done at consumers’ convenience.
Ending the tax holiday was a regressive move that hurt those who can least afford to pay a few extra bucks.
Any supposed benefit to retailers by canceling the two-day shopping spree is offset by the loss of business they endure when consumers take their money south of the border. South Carolina still has a sales tax holiday — it’s today and Saturday this year — and you can bet Tar Heels who live near the state line will be voting with their wallets. Who can blame them?
The Tax Foundation makes some valid critiques of sales tax holidays, and they deserve careful study. But for tens of thousands of struggling families preparing for a new school year, an imperfect tax-free weekend is still better than none at all.
— The Wilson Times