(The Center Square) – Tennessee’s annual back-to-school tax holiday and a three-month grocery tax holiday are about to begin.
The back-to-school holiday runs from July 28-30 and covers clothing, school supplies and computers. Specifically, clothing that costs less than $100 qualifies along with school or art supplies that cost less than $100 and computers, laptops and tablets for personal use that cost $1,500 or less.
That holiday will be followed up with a grocery tax holiday that runs from from Aug. 1 to Oct. 31 and covers food and food ingredients but not alcohol, candy, dietary supplements or prepared food.
While the tax holidays were promoted by Tennessee politicians as a benefit to taxpayers, the Tax Foundation reports that holidays don’t promote economic growth or significantly increase overall purchases; rather, they change the timing of when people purchase those supplies.
“Sales tax holidays are an inefficient response to inflation that encourage spending to be concentrated in a limited window at a time when supply chains are already strained,” the group reports, saying that 17 states held a sales tax holiday in 2022.
“Most sales tax holidays involve politicians picking products and industries to favor with exemptions, arbitrarily discriminating among products and across time, and distorting consumer decisions,” the report states.
The grocery tax holiday is expected to cost Tennessee $272.8 million in taxes as the law held locals harmless by sending other state tax funds their way to cover the local portion of the food tax.
The holiday was part of a $412 million tax cut bill that passed the Legislature in late April.
Tennessee Gov. Bill Lee called the bill the single largest tax cut in state history.
“I applaud Governor Lee for this bold measure to provide more growth opportunities for businesses and financial relief for families on everyday expenses,” Senate Majority Leader Jack Johnson, R-Franklin, said after the bill was signed. “We are proud to be one of the lowest taxed states in the nation, and this move to further cut taxes strengthens our dedication to being a pro-business and pro-family state with low taxes.”
