(The Center Square) – While Ohio students just finished one school year, state officials are already looking to another by announcing the annual sales tax holiday.
However, a Washington, D.C.-based tax policy group says those holidays reduce state and local revenues “with little to no economic benefit.”
This year, the state’s holiday runs for two weeks from Aug. 1-14, with officials saying it’s designed to provide “meaningful savings for families.”
The state expanded the holiday last year, increasing it to 10 days and expanding the types of items exempt up to $500 instead of limiting it to school supplies.
“The timing of this year’s sales tax holiday not only supports families preparing for back-to-school, but also provides relief on other important household needs,” Gov. Mike DeWine said.
But the Tax Foundation believes most purchases made during the exempt period would take place if there were a sales tax holiday or not, leading to government revenue losses.
Joseph Johns and Benjamin Patrick wrote in a report for the Tax Foundation, “…states often schedule sales tax holidays to exempt specified goods and services during times when demand for these goods and services is highest, such as back-to-school products in August and hurricane preparedness supplies before storm seasons. As a result, most of these revenue losses are associated with retail transactions that would have occurred without the added incentive.”
The two also say exempting sales tax over a period of time proves a state’s sales tax creates hardships for consumers during the rest of the year.
“The prevalence of sales tax holidays is indicative of deeper structural weaknesses in state tax codes: the existence of a sales tax holiday a tacit admission that the sales tax is overly burdensome throughout the rest of the year,” the two wrote.
Despite the report, state officials promote the holiday as an advantage for families and a way for shoppers to keep more money.
“Ohio’s sales tax holiday is a practical way we can help working families keep more of their hard-earned dollars,” said Speaker of the House Matt Huffman, R-Lima. “Whether it’s back-to-school shopping or everyday essentials, this is an opportunity for Ohioans to get more value for their money.”
During the holiday, in-store and online purchases are exempt from sales tax, but the exemption does not apply to services or purchases of motor vehicles, watercraft, outboard motors, alcohol, tobacco, vapor products or anything containing marijuana.
