(The Center Square) – As many Ohio parents begin shifting thoughts to back-to-school buys and the upcoming sales tax holiday, a national tax policy group calls those breaks ineffective and inefficient.
The Tax Foundation, a Washington D.C.-based think tank, also called the holidays discriminatory with little economic justification for why something should be tax-exempt at different periods.
“Shifting purchases to a particular weekend is no more beneficial to the economy, all else being equal, than purchases that may occur at a different time of year,” the group said in a report. “Additionally, some consumers may be unable to shop during the sales tax holiday because they are working, out of town, or between paychecks – situations that do not make anyone less deserving of tax relief.”
Ohio limits the sales tax break, which runs Friday-Sunday, to school supplies priced at $20 or less, school instructional material at $20 or less or clothing at $75 or less per item, meaning tennis shoes that could easily cost parents more than $100 and laptops or computers do not qualify for the savings.
Generally, parents will save around $8 for every $100 spent.
“In the end, sales tax holidays are political gimmicks that distract from genuine, permanent tax relief. If a state must offer a ‘holiday’ from its tax system, it is an implicit recognition that the tax system is uncompetitive,” the report said. “Policymakers should reduce the sales tax rate year-round rather than relying on politically popular but economically inefficient and ineffective tax holidays.”
Ohio lawmakers included legislation in the current budget that would have grown the holiday from three days to two weeks and include most things priced at less than $500 in 2024, but Gov. Mike DeWine vetoed the plan.
It would have allowed the state tax commissioner, the director of budget management and the county commissioners association to decide the length of the holiday in 2025 and years after.
“Because the expanded sales tax holiday is a new policy, the revenue loss that will be a result cannot be estimated,” DeWine said in his veto message. “Instead of requiring that the initial expanded sales tax holiday be two weeks long, a veto will allow the tax commissioner and the director of budget management, with the county commissioners association, to determine the length of the first expanded sales tax holiday in 2024.”
