Hefty budget deficits aren’t keeping New Mexico from conducting its annual “Back to School Tax Free Holiday.” Starting Friday, and running through Sunday, “collection of gross receipts tax on sales of qualifying items” will be suspended.
On its website, the Taxation and Revenue Department gushes that the holiday is “nothing short of a bonanza” for those with “school-age children.” Purchases that qualify for the perk include clothing and shoes priced less than $100, “desktop, laptop, tablets or notebook computers” cheaper than $1,000, and school supplies “for use in standard, general-education classrooms” costing less than $30.
The modern era of sales-tax holidays began in 1997, when New York attempted to reclaim business being lost to nearby states with less burdensome levies. Since then, dozens have states have launched similar initiatives, exempting everything from clothing to computers, disaster-preparedness equipment to “Energy Star” products.
As it does every year, the Tax Foundation has issued a blistering assault on sales-tax holidays, calling them “unjustifiable government distortions” that fail to provide “any significant boost to the economy.” Authors Scott Drenkard and Joseph Henchman write that the events merely shift the timing of the purchase of goods, and thus have no stimulative value. In addition, if stores raise their prices in anticipation of the holidays, the value to consumers is weakened. Finally, compliance is no fun for stores. In response to a 2015 survey by the Massachusetts Retailers Association, one vendor outlined its objection: “The sales tax holiday has created more problems than benefits for us. Business is nonexistent three weeks before and two weeks after. As a result, five weeks of business are crammed into two days, and the total amount of sales does not come close to five normal weeks of summer business.”
It’s rare to get the right and left to agree on any public policy, but both sides have serious reservations about sales-tax holidays. The limited-government community seeks consumption taxes that are broadly applied, with low rates all year ’round. “Progressives” decry the revenue losses that the holidays produce — money that is not available for more “public investments.”
So how about a right-left alliance, aimed at permanently killing the useless gimmick that is New Mexico’s annual GRT holiday?