Looks like the Legislature will soon be taking up veto overrides and (sigh) a bill providing for another sales tax holiday weekend next month. In honor of Judy Meredith and Kelly Turley, who are advocating for an override of $5 million in funds for our state’s homeless residents (one-quarter of what a sales tax holiday will cost), here’s a post from 2013 on the holiday’s increasingly dubious policy wisdom. In the two years since this post was written, the state has held two more sales tax holidays, with net losses in tax revenue of $22 million (2013) and $21 million (2014). We’re well on our way to giving up $200 million since the first holiday 11 years ago.
Summer is at its peak. The tomatoes are ripening, tassels are appearing on the corn, and our Legislature, once again, is entertaining the idea of a “Sales Tax Holiday.” For eight of the nine past summers, the Legislature has chosen one weekend in August to suspend the state sales tax, declaring the event a once-a-year respite for the hardworking taxpayer. That hardworking taxpayer, whose car needs four new tires because of the deplorable condition of our roads, will get to pocket about $20, and our roads will remain deplorable.
In 2004, the year of our first sales tax holiday, retailers predicted that the economic growth created by the enormous volume of sales would more than make up for the loss in sales tax revenue. “Christmas in August,” they beamed. “Bring it back next year.” And so the Legislature has.
But every successive holiday (only in recessionary 2009 was it cancelled) has added doubts about its economic wisdom. To the public, the holiday is no longer an unexpected surprise, it’s a settled expectation. (Jordan’s Furniture is already announcing in television ads that this year’s holiday will be the second week in August.) And, as the Tax Foundation has documented, when buyers are able to anticipate the holiday, it does not stimulate more sales, but simply shifts the timing of sales to coincide with the holiday.
Studies by our state Department of Revenue of the most recent sales tax holidays confirm the Tax Foundation’s cautionary findings. Even accounting for (the very small amount) of increased economic activity that was generated, the net loss to the state from the 2012 holiday was $21 million. In 2011, it was $18.7 million. In 2010, it was $18 million.
Our state leaders seem to be aware that the sales tax holiday makes less and less sense as a policy matter. When Governor Patrick signed the 2011 holiday into law, he observed that, while it was popular, it was not necessarily prudent (State House News, 8/1/11). And the Senate Ways and Means Chair, while defending the program, said in a moment of understated candor that it “may not be the finest public policy on the planet” (State House News, 7/28/11).
The total losses from our eight sales tax holidays have almost certainly exceeded $100 million.* That money could pay for some repaired bridges, roads and dams, or for an investment in high quality pre-school education for more of those kids who will one day be supporting us in our retirement (may their accomplishments — and their salaries — suffice).
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*In addition to the figures for 2012, 2011 and 2010 cited above, the Department of Revenue estimates that the 2008 holiday cost $13.1 million. That makes a total of $70.8 million, not including the holidays for 2007, 2006, 2005 and 2004 (which was a one-day rather than a weekend holiday).
That says it all. Well, almost all of it. The deplorable roads will lead to expensive suspension and wheel damage costing well in excess of $20. There is no free lunch.
…to justify adding employees who will in turn pay enough income tax to cover the difference it isn’t worth it. We often hear we should run government like a business, but wouldn’t running it like a business mean trying to maximize revenue just as businesses try to maximize profit?
And sleep well.
That’s one hell of an expensive refrigerator! You must shop at different big-box stores from me.
Liebherr CBS 2062
$4,999
* Price not verified
Visit Store
Who wouldn’t like a $5000 refrigerator?
Total net capacity of refrigerator in cubic feet 12.8 Net
Dimensions: appliance height in inches 80 5/16 Measurements: appliance width in inches 35 7/8 Measurements: depth of appliance incl. distance to wall in inches 24 1/4
Product Specifications
Sold By
Liebherr Appliances http://www.houzz.com/photos/165039/Liebherr-CBS-2062-modern-refrigerators-toronto
Category
Refrigerators
Style
Modern
I think the description forgot to mention the solid gold plating on the outside.
I enjoyed the “Visually Similar Products” list on the Liebherr Appliances link, where I can buy a Hotpoint 15.7 Cu Ft top freezer refrigerator for $1,047.76, a GE 16.6 Cu Ft top freezer refrigerator for $891.80, or a GE Energy-Star 15.5 Cu. Ft. top freezer refrigerator for $938.49.
The sales tax holiday will certainly make ME wait to pay $390.55/Cu Ft tax-free, rather than paying that onerous $46.18 sales tax on the $53.72/Cu Ft model (the first GE). I just saved $46.18, right?
“…Liebherr-CBS-2062-modern-refrigerators-toronto…”
since I hate the sales tax holiday, but the cap on the purchase price is $2500. It is still a ridiculous loss of revenue for the Commonwealth but we might win this argument with facts, not exaggeration.
I know someone downsizing who decided to get all new furniture at the same time. They have been shopping for furniture, appliances over the last few weeks, the stores are planning on writing things up during the holiday, and have agreed to hold delivery until Oct when their new place will be done. It’s become expected.
… like Jordan’s Furniture that are advertising that they’ll let you buy “now” and get a rebate or credit for twice the sales tax amount. That seems like a win-win-win: state still gets its $$, buyer saves even more $$, and the company gets the business (albeit at a smaller profit).
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…I heard you like refrigerating things, so I put a refrigerator in your refrigerator so you can keep things cold while you keep things cold!
The inside refrigerator will try to heat up the outer one, and will wind up wasting energy.
I think that’s the point of sabutai’s original joke.
It doesn’t work. These holidays concentrate, not add, consumption. Anyone with a keyboard and search engine can figure that out.
I can respect ideological disagreements with my government; I cannot respect lazy inertia.
about the policy wisdom of the sales tax holiday here.
(You read it on BMG first.)
When we went from 5% to 6.25%, didn’t folks around here complain that the sales tax is regressive? Sure, there are exemptions for food, clothes, prescription meds, newspapers, professional services, sporting event and concert tickets, diapers, fertilizer, US flags, religious and educational books, comic books, and gun safes, but still…
if the sales tax is regressive, then isn’t a sales tax holiday by definition more progressive than not?
but it doesn’t follow that a sales tax holiday is a good way of providing relief to those on whom its regressive quality falls the hardest. There are lots of reasons (mobility, timing, cost) that low-income consumers may not be able to take advantage of a tax cut on a single weekend. If a goal of the sales tax holiday is to make back-to-school supplies, for example, cheaper for low-income individuals, then a 6.25 percent price reduction for everybody (but only for a 48 hour period), is an extremely ineffective way of getting there.
My fiancee and I consider trips back home to be personal sales tax holidays, as everything is taxed at 10.5% in Cook County. I invite anyone bitching about Massachusetts taxes to switch places with us. MA is the 26th most taxed state in the union, it has a modest sales tax compared to many other peer states, and generous exemptions that I have not encountered in other states. The pressure for a sales tax holiday is a mythical ‘loss’ in retail revenue to New Hampshire, which lets face it, has way higher property taxes and worse roads and schools than our homestate. If it wasn’t for our neighbor to the north, the myth of Taxachusetts would’ve died years ago. Rhode Island is at 7% if I recall, Connecticut has some of the highest gas taxes in the country, and New York and Maine lack the exemptions we have in so many areas.
Hell, Indiana and Wisconsin belie their ‘pro growth/free market’ reputation since neither have exemptions and Indiana actually has higher sales taxes than Massachusetts. We are a closet fiscally conservative state, and it is time more folks recognize that and realize that our budget woes are due to lack of revenue rather than big government.
eom
What is “needle skip” a reference too? You’ve used it at least a couple times recently.
Either he is saying I am being repetitive since I’ve worn that anecdote out like a record (I possibly have…) or that we keep electing the reps that elect DeLeo who is the biggest figure in opposing new revenue. Possibly both, since the other times were replies to my posts as well, but they were around the revenue issue.
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Anybody who proposes cutting taxes needs to say what services they are willing to sacrifice or how else they think we should raise revenue.
Go on, tell me again how you think that’s regressive.
It’s a necessity for a lot of us living paycheck to paycheck and thus a higher portion of our income.
Do you think the gas tax is more or less regressive than the sales tax?
Which is why a carbon fee and dividend is the most sensible route from a policy perspective. You raise the price of consumption and thus lower the demand, encouraging greater efficiency and reliance on non-car based forms of transit while also sending the proceeds of the tax back in the form of an annual or monthly rebate check, similar to the Alaskan dividend, which can act as a form of income enhancement laying the groundwork for a basic income down the road. A win win all around for the climate and working families. Also a nice way to shift the conservation so that working stiffs and climate activists are now on the same page.
It’s an active plan you should both write your rep and senator to support, Sen. Barrett’s plan is awfully similar.
…but I’m already pretty conservative in my own use, thank you.
costs more than the sales taxes collected from binders, #8 pencils, plastic pens and paper…. all year long.
So a much more effective way of helping young families would be to just add those items to the list of sales tax exemptions, along with food, medicine and clothes… if we’re really worried about created ‘tax relief’ to those who need it.
Are those four times better than the #2 pencils I used in grammar school?
n/t
I must officially be getting old now to have called them #8 pencils…
are not the same people who are hurt most by it, for starters.
most by the sales tax.
Both the House and Senate have formal sessions scheduled. If the sales tax holiday is going to take place on 8/15 and 16, as per the bill now in the House Ways and Means Committee, it’s going to have to pop out of there and get to the Governor real soon.
Speaker DeLeo has said he is concerned about the loss of $25 million in tax revenue, but fears the holiday “has become so popular…that I think it’s somewhat difficult to try to put the brakes to it.”
You can help him by telling your legislators that you’re opposed to House Bill 3659 before noon tomorrow.
Can you front page this important issue again?
he could always dial the sales tax holiday back a bit.
Throw in some other items in the non-exempt sales. Say, for example, anything with a gasoline or diesel engine (snow blowers, chain saws, lawn mowers, tractors, electric generators, etc). Another example is to make rentals non-exempt. They’re examples, I’m sure folks could come up with more.
Drop the threshold from $2,500 to something lower — $2,000 or $1,500.
I get that it’s hard to eliminate it due to expectations, but by dialing the benefit back, (a) it will cost less than $25 million, and (b) it will make it easier to eliminate it or dial it back further in 2016.
And some people are working on it.
but as to dropping the threshold, I bet the real political support comes from consumers who are scheduling a high-end purchase for that weekend and from the retailers who are eager to see them.