May 15, 2006

Trendy Tax Break

Perhaps one of the most misunderstood and unpopular words in the English language is tax. Partner this T-word with something that has really positive appeal like the word holiday and for politicians across the country you've got a great election year policy.

Tax holidays are sweeping the nation and they aren't just for school supplies any more!

Earlier this month, both houses in the Florida legislature voted for a 9-day sales tax holiday and Governor Jeb Bush will most certainly sign the bill into law.
Florida shoppers won't have to pay sales tax on books, clothes, wallets and most bags selling for up to $50 and school supplies such as pens, pencils and binders selling for up to $10.
This holiday comes with quite a price tax - $38 million in lost revenue to the state and an estimated $7 million loss for local governments. Florida tax holidays aren't just for school supplies either. On May 21 through June 1, no sales tax will be levied on products purchased for "Hurricane Preparedness." Included in the list of tax-exempt items are:

  • Cel phone batteries with a price tag of less than $60
  • Candles that cost less than $20
  • Tiki torches worth less than $20

For a complete list of exempt items click here.

Late last month, Alabama Governor Bob Riley signed a "back-to-school" sales tax holiday into law for the first weekend in August. During that weekend individual clothing items that are less than $100 are exempt from sales tax.

Even though sales tax holidays are politically popular they aren't a silver bullet for legislators trying to offer genuine tax relief. For more on the policy implications of sales tax holidays click here to real ITEP's Policy Brief on this topic.


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