This Friday and Saturday, it’s Louisiana’s back-to-school sales tax holiday!
But before you hit the stores expecting a deeply discounted total on your bill, Joe Henchman with the national non-profit Tax Foundation says buyers should be aware of what they’re really saving with this “tax holiday”.
“Big posters at retail stores that say ‘2 percent off’? I don’t think a lot of people would rush into the stores for those,” Henchman remarks.
He just completed a study of the efficacy of state sales tax holidays and says they don’t deliver.
“They’re sold as a way to target relief to low income people, but it’s a holiday available to anyone who goes to a store just on this particular weekend.”
Louisiana used to relieve the full four cents of state sales tax for its tax holidays, but when lawmakers upped the tax to 5 percent last year, they cut the break back. And at just two-percent off, Henchman says the impact isn’t much – for consumers or for the state.
“The tax relief – it’s much more sizzle than steak,” Henchman observes. “It’s about $4-million a year, which is more than I have on me, but it’s not much in terms of the overall state budget.
“This is primarily a public relations. thing, so politicians can talk about how they’re cutting taxes, and retailers can get free advertising for what amounts to about a two-percent-off sale.”
Henchman says the study also shows some retailers leverage the rule of supply-and-demand for these events. Anticipating increased demand, they often raise their prices in advance.
“Just make sure you do your homework of what prices are like outside of the holiday, or else you might end up paying more,” Henchman urges.
He’s also hoping Louisiana’s lawmakers will take note of all this.
“You know, you can lower the rate one weekend a year, or you can tackle something more permanent and lasting, like comprehensive tax reform.”