Tax holiday could come dearly
Analyst says state has much to lose, consumers won't save much
Topeka ? In their race to give Kansas families a tax break before the elections, lawmakers might want to think twice about enacting a sales tax holiday, a tax policy expert says.
While popular in other states, the removal of sales taxes during a brief period – usually to coincide with back-to-school shopping – could result in some problems.
“It’s a political gimmick, a feel-good thing,” said David Brunori, a public policy professor at George Washington University, who specializes in state and local tax policy.
In Kansas, the sales tax holiday bill is being considered by the House Taxation Committee. The measure, HB 2601, would exempt from the state sales tax per shopper up to $300 of clothing purchases, $100 in school supplies, $2,000 for computers, and $300 in computer software during several days, probably in late July or early August. Cities and counties could also waive their portion of the sales tax during that period.
Store owners on the Kansas side of the Kansas-Missouri border said they needed it to compete because Missouri offered a sales tax holiday.
Lawmakers who are eager to please businesses and parents are pushing it hard. The holiday would fall right around the Aug. 1 political primaries.
At least 11 other states have such sales tax holidays, and more are considering them as the movement sweeps across the country.
But Brunori said the experience of other states that had instituted the tax holidays showed that often retailers got rid of their sale prices and discounts, so consumers were paying pretty much the same anyway.
“The net effect for the consumer is a wash,” he said.
The Kansas Association of School Boards also opposes the measure.
“It may seem odd for the KASB to oppose a bill that will arguably assist parents of school children throughout Kansas with the purchase of school supplies and clothes,” said David Cunningham, an attorney with the KASB.
But because the legislation would result in a $3.7 million loss to the state treasury, KASB says that could short funds to public schools when the Kansas Supreme Court has ordered increased school funding.
“(The bill) will decrease state revenues at a time when the need for resources is critical,” Cunningham said.
It also could simply shift expenses, he added. Retailers say the average back-to-school shopping expense is about $250 per child. Removing all sales tax on that amount would save the shopper nearly $20, they say.
But Cunningham said, “Parents could save a few dollars in sales tax expenses only to pay higher textbook rentals, workbook and lab fees and pay-to-play fees that could exceed the tax savings.”
Some legislators have expressed concern over the tax holiday’s effectiveness.
Rep. Paul Davis, D-Lawrence, said anyone could buy a computer during the tax holiday and claim it was for school.
Rep. Virgil Peck, R-Tyro, the bill’s sponsor, conceded that was true.
“There is no particular way to police that. From my understanding, that has happened in other states,” he said.
Brunori said the tax holidays also violated a foundation of sound tax policy for the government to remain neutral and consistent in developing a tax system.
“The government is telling you to shop this week,” he said.
But Brunori predicted the tax holiday would pass in Kansas.
“It’s great for politicians. Nobody has the backbone to say this is really ridiculous from a tax policy standpoint,” he said.