School bells are silent, but the cash registers are ringing in as back-to-school shopping takes center stage. Tax holidays, a perk for some lucky states, promise savings on essential school supplies and clothes. But before we all stampede to the stores to plunk down our heard-earned dollars, let’s take a closer look at this shopping strategy.
On the surface, tax holidays seem like a win-win. We, the consumers, get to keep more money in our wallets, a welcome relief considering the ever-increasing costs of school gear. Retailers, as the sellers of the goods, get to increase their sales. Easy-peasy, right? Wrong. Let’s explore why.
Back in the days before tax holidays were a thing, retailers competed fiercely for our back-to-school dollars by instituting enticing sales and by offering deep discounts. We, the consumers, benefited from this competition by receiving significant pricing reductions. Of course, the state still collected its share of sales tax from the transactions. It was a win-win-win for everyone.
Now, following the creation of these back-to-school sales tax holidays, a trend emerged in which retailers no longer had to offer the deep discounts to compete, as they simply rely on the sales tax holiday to draw in shoppers. Look at the some of the advertising – they advertise the tax holiday rather than sales. It may seem like consumers benefit by saving the sales tax, but they would have saved previously, in the form of the discounts offered by the retailers. Now, the retailers get to charge full-boat, the consumers’ out-of-pocket is relatively the same, and the states (us, really) suffer a decrease in tax revenues. Who is the winner? Retailers, for sure.
In the olden days, it may have been a boon for small businesses, who would see an uptick in their volume. However, nowadays, most purchasing is being done at big-box and massive online retailers, some of the largest corporations in the world, some of which have higher GDPs than most countries. They certainly don’t need a hand-up at the expense of state tax revenue. What are we doing?
Sure, tax holidays can offer some relief, especially for families with multiple children. However, it’s crucial to be a savvy shopper:
- Track prices: Don’t assume the tax-free weekend translates to the best deal. Monitor prices leading up to the event and compare them during the tax holiday.
- Shop around: Don’t get stuck at one store. Compare prices across different retailers to see who might be offering additional discounts on top of the tax savings.
- Explore online options: Online retailers might have additional promotions or free shipping offers during the tax holiday period.
Let’s keep our eyes on the big picture :
- Retailers experience increased sales at higher margins;
- Consumers don’t experience double-savings as the retailers simply keep their pricing at normal levels; and
- States lose out on vital sales tax revenue when it implements a tax holiday. These funds go towards essential services that benefit everyone. We all use roads, traffic lights, water, sewer, etc., don’t we?
So, while tax holidays may seem like a slam dunk for consumers, they’re not. They are nothing more than a wealth transfer from the haves to the have-nots under the auspice of lower taxes. Politicians love to pound their chests about lower taxes, but that rarely is the best solution for average citizens. Perhaps a better long-term solution would be targeted assistance programs for low-income families or permanent tax reductions on essential school supplies.
What are your thoughts?
Do tax holidays truly benefit consumers, or are they a nothing more than a cleverly-disguised grift designed to allow retailers to pocket more money from each sale at the expense of our infrastructure? Share your thoughts and opinions in the comments below!
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