Why Are Local Governments Opting Out of Tax Holidays?

sales-tax-holiday-1Localities throughout the nation are opting out of tax holidays that encourage economic growth for local businesses.

When this year’s weekend of the “Back to School Tax Holiday” came around, Aya Katz looked forward to buying a laptop for her daughter, a senior in high school.

Normally Aya shops for school supplies in the Wal-Mart store in Houston, Missouri, but when she looked up the Tax Holiday online, she learned that the City of Houston, the nearby City of Licking, as well as the entire County, had opted out of the tax holiday.

Because of this, she drove with her daughter to the town of Rolla, a two-hour round trip, to buy school supplies. Even then, Rolla city taxes were waived, but the Phelps County taxes of 1.125% were not.

For both Aya and the local businesses in Houston, this was a bad deal. She had to spend money and time making her way to another city to avoid taxes on necessary items while local businesses lost out on revenue.

But why did these cities and counties decide to opt out of the tax holiday?

Fred Stenger (Presiding Commissioner), John Casey (District I Commissioner), and Linda L. Garrett (District II Commissioner) are the Texas County Commissioners who made the decision to opt out of the tax holiday. When asked why they had decided to opt out, Commissioner Garrett said that ultimately the Commission just thought it would be a “hassle” to participate in the tax holiday, and that they thought it would really cut into the sales tax profit they were counting on when they made the budget at the beginning of the year.

Additionally, Texas County had an informal agreement with surrounding counties to all not participate.

So who is hurt by this decision?

The only way opting out of the holiday would net more sales tax in Texas County or in the City of Houston would be if there were people trapped within the county and the city who could not afford to go to Rolla or to shop online for school supplies.

150723_EM_BTSShoppingTaxFreeWhat sort of people would those be? They can be people who have no car, who have no access to a computer, or people who can only pay cash for purchases, because their credit is really bad, so they cannot shop online. In short, the people who cannot afford to buy much in the first place are the ones forced to pay the tax.

How much tax would they end up paying? Not much. At most they would buy a few pencils. These are not the people who would purchase a computer right before school starts.

How would forcing the poorest of the poor to pay sales tax on pencils while everyone else gets them tax-free be a good idea? People who work at the local Wal-Mart benefit when Wal-Mart sales increase. People who have money to buy big ticket items benefit when they can do so locally. Texas County and the City of Houston benefit because being a wealthier county and city provides a bigger tax base from which to pay property taxes.

“A tax holiday in Houston, Texas County, Missouri would be a win for both consumers and retailers,” said Katz. “It might even bring us shoppers from other counties where the tax still applies. In this case, what is good for the local economy would also be good for local government. “

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