Georgia’s Brilliant Plan to Dump The Tax-Free Weekend
Georgia will not be holding its tax-free weekend this August. WRDW has a crying Oprah GIF. The Macon Telegraph uses phrases like “Georgia shoppers will miss out” and “legislators shut down the sales tax-free weekend.” But is that really the case, or is this a surprisingly shrewd move from the Gold Dome?
The annual tax-free weekend started as a good idea, as most things do, where parents and teachers could purchase items for educational purposes without tax for one weekend a year in the summer as they planned for the upcoming school year. I taught ninth grade during the 2000-2001 school year, and the summer of 2000 was the first time the tax holiday was offered in Georgia, as well as in about 20 other states. I was thrilled, given that I was given one pack of college-ruled paper, two packs of pens, a pack of chalk, and a stapler for my room for the entire year. Also, ironically, I had a white board in my room, not a chalkboard.
You’d better believe I bought bulletin board decorations, posters, books for a small lending library, dry erase markers, pencils, erasers, and other office essentials during that weekend.
The idea was that teachers and parents would increase consumption, and therefore spend more money, jogging the economy. What the Fiscal Research Center at Georgia State University has found over the past decade and a half, however, is that people don’t increase their spending, but rather they hold off on making purchases until the tax free weekend, costing the state and localities between $36 million and $50 million annually. That is surely what I did. I’d have had to buy all of that stuff anyway. (Okay, “have had” is probably incorrect, but I would have.) This means that the weekend wasn’t a great boon for the state or retailers. But consumers got a break from the taxes, so that was a reduction of the out-of-pocket cost, right?
Not so fast.
Last year about this time, our Jon Richards wrote a post about the tax-free holiday, in which he found an article with folks on both the left and right criticizing the weekends. The Tax Foundation, for instance, found that these weekends offer little benefit to consumers because retailers often increase prices on items included in the exemptions. The Georgia Budget & Policy Institute found that it would make more sense to take the money that would be gained from not holding a tax-free weekend to lessen or eliminate austerity cuts in school budgets, which would benefit residents more than four days without tax on specific items.
For what it’s worth, almost every state bordering Georgia will continue to hold its tax-free weekend, with the exception of North Carolina, which ended its tax-free weekend in 2014. If you must have your tax-free fix, here’s the whens and hows of every state holding one this year. However, you may want to price check before you cross the border. North Carolina retailers near the South Carolina border have put on really good sales to compete with South Carolina’s tax-free weekend in the past two years. Georgia retailers might do the same this year as the border states hold their tax-free weekends, which would mean better prices for consumers and no lost revenue for the state. Win-win!
Actually, the Tax Foundation did not find “retailers often raise prices” during tax-free weekends. It says clearly, “Some retailers raise prices during the holiday.”
In fact, the only evidence of this was ONE study in ONE city (Mobile, Ala.) that found increases on ONE product (inexpensive laptop computers) — but it also found “lower prices of inexpensive desktop computers” and was clear: “some of the price increase occurred for reasons other than the sales tax holiday.”
So we go from a study saying ‘one retailer may have raised prices on one product’ to your contention “retailers often raise prices.”
As for the logic of the Georgia Budget & Policy Institute — use the extra revenue from cancelling the tax-free weekend to “lessen or eliminate austerity cuts in school budgets” — do you honestly believe the state would take that extra money and give it to schools, rather than dump it back into the general fund (or find a way to give tax breaks to someone who doesn’t need it)?
Not to say there aren’t good arguments against a tax holiday, but let’s be careful when we cite the reasons.