Like its predecessors, it was unquestionably popular with shoppers, as stores were thronged. And why not? Not only did shoppers not have to pay the 4 percent state sales tax, they also were not charged Cobb County’s 2 percent sales tax. The Georgia Retail Association predicted earlier this year that the holiday would generate an additional $476 million in economic activity. The sales had been suspended for several years as the state dug its way out of a budget hole.
But at the risk of looking a gift horse in the mouth, serious questions remain as to whether such holidays help or hurt. And that’s on top of the complaints about the timing of this year’s holiday, which was scheduled after many school systems (including Cherokee’s) had already resumed classes.
A new national study by the Washington, D.C.-based Tax Foundation (www.taxfoundation.org) shows that most consumers time their purchases for the sales-tax holidays. In other words, the holidays aren’t really doing much to stimulate sales in the 17 states (including Georgia) that hold them.
Also to be considered are the costs for businesses, which must reconfigure software and add manpower for the sales. Many observers have wondered whether the sales tax revenues lost by the states via such holidays are recouped via impulse buys by shoppers on those weekends for items that are not tax-exempt, such as that new purse or watch or the meal you and your kids grabbed at the mall’s food court. The Tax Foundation study states they are not.
And Georgia is no longer even getting the benefit of non-exempt impulse purchases by shoppers from neighboring states because Alabama, Florida, North Carolina, South Carolina and Tennessee all now have such sales tax holidays. In fact, one of the best arguments that can be made at this point for keeping the Georgia sales-tax holiday is that it keeps such spending in-state, rather than encouraging Georgians who live near our borders to drive across state lines to do their Back-to-School shopping.
There’s also a subtle message in the popularity of such tax holidays that we hope our elected officials will pick up on: That is, people don’t like taxes, and they especially don’t like paying sales taxes. Those officials got a sharp reminder of that in the crushing rejection of the July 31 TSPLOST referendum. And hopefully the crowds in the stores this weekend reinforced the message that the best tax is the lowest possible tax.