Hurricane Season Sales Tax Holidays: Save Now, Pay Later

Hurricane season is upon us and to help flip-flop-wearing
Floridians prepare, Gov. Rick Scott recently approved a nine-day
sales tax holiday, which ends Sunday.

Batteries, flashlights, generators, weather radios, and water
are all on the list of things you can buy without paying the
state’s 6 percent sales tax.

The tax holiday, which is really a government
stimulus in disguise, is just
one of three that Scott has bestowed upon the state.
Louisiana and Virginia have already held their hurricane
season tax holidays. But in states not lucky enough to be the
subject of Mother Nature’s watery wrath, back-to-school events tend
to win similar temporary tax reprieves. In 2013, 17 states put
on tax holidays for education.

Gov. Scott and other politicians enjoy touting the benefits of
these sales tax vacations because they are popular with voters.
They say it helps the poor, and the retail
rush boosts the economy. But are those claims true?

The short answer from the Institute on Taxation and Economic
Policy is “no.”

In a 2013
report, the institute addresses claims that the holidays
inflate retail sales: 

Increased sales during sales tax holidays have been shown to be
primarily the result of consumers’ shifting the timing of their
planned purchases.

And who are the consumers who are best able to shift the timing
of their planned purchases?

Wealthier taxpayers are often best positioned to benefit from
the holidays, since they have more flexibility to shift the timing
of their purchases to take advantage of the tax break—an
option that isn’t available to families living paycheck to
paycheck.

The report found other problems with the the economics of
government-sponsored shopping seasons as well, including retailers
exploiting them by temporarily increasing prices or watering down
sales promotions, and the increase of administrative costs for
state and local governments that normally collect the
tax. 

In the long run, the study concludes,

Revenue lost through sales tax holidays will ultimately have to
be made up somewhere else, either through painful spending cuts or
increasing other taxes.

Steve Chapman came to the same conclusion in a
2010 article for Reason in which he asked:

If sparing shoppers the sales tax is such a blessing, why don’t
our leaders get rid of it the whole year round? If it’s a dose of
adrenaline to a weak economy, why not repeat the treatment next
month, and the month after? If we can increase state collections by
suspending the sales tax, couldn’t we increase them even more by
abolishing it?

Might as well get your reduced-price
chainsaws now! You’ll pay the difference later anyway.