August 2011 state sales tax holidays

Shoppers in 16 states will be hitting the stores in full force this month, taking advantage of the annual round of sales tax holidays.

These events exempt select items (or not so select in a few states; Louisiana and Massachusetts have virtually no limits) from state and sometimes local sales taxes.

The table below lists the August back-to-school tax holidays alphabetically by state. It also provides a general overview of the tax-free items, but check each state's special tax holiday website (that's where the links go) for details.

Popular, but bad tax policy: Although the tax holidays cost states revenue and cause extra work for businesses that much keep track of the temporary tax changes, consumers love them.

And anything that makes potential voters happy is high on lawmakers' lists.

"We do it frankly, not because it's particularly fiscally prudent but because it's popular," said Massachusetts Governor Deval Patrick as his state's tax holiday was working its way though the legislature.

That attitude is why so many tax experts dismiss sales tax holidays as gimmicks.

"We just don't know if anyone really benefits from sales tax holidays, largely because there is no transparency or accountability." says Matthew Gardner, Executive Director of the Institute on Taxation and Economic Policy. "Of course politicians love the great PR, but with all the time they spend planning, promoting and implementing these events, they’d do better to focus on long term solutions with real benefits for more taxpayers."

ITEP endorses permanent reforms, such as targeted tax credits. These tax breaks are more cost-effective, says ITEP, because they ensure the benefit goes specifically to taxpayers the provision targets.

But tax holidays are easier to enact. So expect to see them stick around.

Related posts:

• Tax holidays: Bonanzas or bogus?
• State use taxes tend to be useless
• State Tax Departments

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