In these tough times its hard to be sure what is, and what isn’t, part of the Texas tax-free holiday. But it also might be hard to decide whether it is really a socially responsible policy.
First of all what is it?
Set-up under Texas State Code, for one weekend a year in August the Texas sales tax is waived on select goods that are deemed necessary helpful to parents and students preparing for the upcoming school year.
Items covered include:
- School Supplies:
Binders, Book bags, Calculators, Cellophane tape, Blackboard chalk, Compasses, Composition books, Crayons, Erasers, Folders, Glue (paste and paste sticks), Highlighters, Index cards, Index card boxes, Legal pads, Lunch boxes, Markers, Notebooks, Paper (various kinds) Pencil boxes and other school supply boxes, Pencil sharpeners, Pencils, Pens, Protractors, Rulers, Scissors, Writing tablets- Clothing Items:
Baby clothes, Backpacks for use by elementary and secondary students, Belts with attached buckles, Boots, Caps/hats, Coats and wraps, Diapers – adult and baby, Dresses, Gloves (generally), Gym suits and uniforms, Hooded shirts and hooded sweatshirts, Hosiery, Jackets, Jeans, Jerseys (baseball and football), Jogging apparel, Neckwear and ties, Pajamas, Pants and trousers, Raincoats and ponchos, Robes, Shirts, Shoes (sandals, slippers, sneakers, tennis, walking), Socks (including athletic), Shorts, Suits, slacks, and jackets, Sweatshirts, Sweat suits, Sweaters, Swimsuits, Underclothes, Work clothes and uniformsNote: There are some specific exceptions to this list so be sure to also check-out the state website for the exhaustive outline of goods covered.
But is the Tax-Free Holiday socially-responsible?
On its face the policy is very popular. Law-makers feel they are giving something to the hard working parents, stores like the extra business, and kids like that they can usually get mom or dad to shell out a few extra bucks for those jeans or backpack they really-really want. However, the question is does a state subsidized discount of just 8.25% make sense compared to the costs to the state and our own pocketbooks?
As the state has cut education this year, and forced districts to lay-off many teachers and support staff, does shrinking available revenue really assist us as a state in the long run? Obviously this has implications for a lot of areas of state funding too, but supporting parents getting their kids ready for school has supposedly been central to this policies goals. Does it do much good if the schools are taking far more resources and teacher-time away from your kids on the other side?
A recent report by the Austin-based Center for Public Policy Priorities questions three areas where the Tax-Free Holiday it may not be reaching its intended goals:
Problem One: Mostly goes to families at the top
The sales-tax holiday mostly benefits higher-income families who can afford to shop in bulk. Families with enough income to pay for a school year’s worth of clothes do better than families who can buy just one outfit at a time. In fact, one study showed that more than 40 percent of the total tax savings goes to families with annual incomes over $70,000.Problem Two: No real savings for anybody anyway
Retailers know that buyers are attracted by the something-for-nothing illusion of the sales tax holiday and therefore don’t offer real back-to-school sales to attract customers. By waiting another weekend for a real sale that may offer 10 percent off your purchases, consumers would save more money than if they bought full-price items on the phony sales-tax holiday sale.Problem Three: Costs too much
The sales tax holiday isn’t free. In 2011, the state will miss out on $47 million in revenue—enough to have prevented the budget cuts to TEXAS Grants that help high school graduates who have the grades, but not the money, to attend college. Our cities and counties will miss out on $14 million that could have been used to fund police, fire, and other essential, life- sustaining local services.
Economic boost or shooting ourselves in the foot?
Since the sales-tax holiday has become policy in Texas, retailers have learned to work with it to increase business and traffic-flow into their stores, often by offering attractive additional sale prices on certain items And with increased traffic flow may come other benefits to the economy and state coffers, particularly if parents and their students buy other items not on the state subsidized discount list. Still its hard to be sure without a more extensive study done on the Tax-Free Holiday implications – both for state revenue and for our overall economy.