[Cross-posted from ONEMassachusetts.org]
Last Friday, the Legislative Leadership decided to stage the annual summer debate around a sales tax holiday. The bill, filed by Senator Hart, will be heard by the The Joint Committee on Economic Development and Emerging Technologies today, Monday July 25th, at 11:00am [Hearing Details] [PPI Executive Director, Judy Meredith’s Testimony].
Over the weekend Legislators called our staff, urging the ONE Massachusetts network to mobilize against Sales Tax Holidays. (Your great work around the Act to Invest in Our Communities and our Summer Campaign Launch to urge local activists to meet with their legislative delegation has been noticed!!)
CALL TODAY – URGE YOUR LEGISLATORS TO:
- VOTE NO on Sales Tax Holidays
- Ask Leadership to stage a full and fair debate this fall around progressive tax reform.
We anticipate the House and Senate voting on the Tax Holiday on Tuesday or Wednesday (because by law they are recessed on July 31 till the fall). Clearly this is an opportunity to influence our legislators before they pass bad tax policy.
According to the Massachusetts Budget and Policy Center,
The Governor and Legislature have now finished work on a budget for Fiscal Year (FY) 2012 that addresses [a state facing gap of close to $1.9 billion], primarily with a combination of cuts and reforms. [Full Report]
Research by our state’s own Department of Revenue on the 2009 Sales Tax Holiday found,
The amount of forgone sales tax revenue was approximately $19.9 million. DOR estimates that this forgone revenue had no impact on the MBTA State and Local Contribution Fund, but impacted the amounts going to the School Modernization and Reconstruction Trust Fund ($3.2 million), Commonwealth Transportation Fund ($1.2 million), and Substance Abuse Fund ($0.5 million).
The Institute on Taxation and Public Policy included these facts (and others) in their list of problems with the Sales Tax Holiday Approach [Full Report]:
- If the goal is to provide tax relief to the low-income families for whom sales taxes are most burdensome, sales tax holidays are poorly targeted, providing tax breaks to even the wealthiest taxpayers.
- Many low-income taxpayers spend most or all of their income just getting by – which means that they have less disposable income than wealthier taxpayers. These taxpayers may not have the luxury of shifting the timing of their consumption to coincide with week-long sales tax holidays.
- Unscrupulous retailers can take advantage of this shift in consumer behavior by increasing their prices (or failing to reduce them by the full amount of the sales tax break) during the tax holiday.
- Revenue lost through sales tax holidays will ultimately have to be made up somewhere else, either through painful spending cuts or increasing other taxes.
Even the Tax Foundation (a fiscally conservative organization) has come out against the Sales Tax Holiday, citing these (among other) reasons [Full Report]:
- Sales tax holidays do not promote economic growth or significantly increase consumer purchases; the evidence shows that they simply shift the timing of purchases. Some retailers raise prices during the holiday, reducing consumer savings.
- Sales tax holidays create complexities for tax code compliance, efficient labor allocation, and inventory management. However, free advertising for what is effectively a paltry 4 to 7 percent sale leads many larger businesses to lobby for the holidays.
- Most sales tax holidays involve politicians picking products and industries to favor with exemptions, arbitrarily discriminating between products and across time, and distorting consumer decisions.
A good summary of the overall picture of Sales Tax Holidays comes from Massachusetts Taxpayers Foundation president, Michael Widmer:
The expense makes the holiday a frivolous, feel-good measure, at best, during good fiscal times… it would be a poor investment during what will be the fourth straight year of state budget cuts. He concedes there’s a modest economic stimulus, although he says many of the tax-holiday purchases would have happened anyway at other times of the year. [Full Article: GateHouse News Service]