Sales Tax Holidays: Popular Policy “Clunker”

Curtis Dubay / August 07, 2009

Virginians will celebrate their annual “sales tax holiday” this weekend—August 7 through August 9. On these three days, the state’s 5 percent sales tax will be exempted from school supplies, clothing, and footwear. Each eligible school supply item must be priced at $20 or less, and each eligible article of clothing and footwear must be priced at $100 or less.

Many other states in addition to Virginia will also have sales tax holidays this year during the “back to school” shopping period. The idea is to lower the cost for parents preparing to outfit their school age children with supplies and clothing for the upcoming school year, and to provide a boost for retail stores. Such holidays are popular with shoppers, and therefore state legislators are eager to offer them. But that doesn’t mean they are good tax policy. (more…)