Georgia sales tax holiday good for shoppers, bad tax policy

Georgia’s sales tax holiday takes place Saturday, July 30 and Sunday, July 31. As always, the day offers shoppers the chance to purchase certain items tax free.

August 7, 2013 Atlanta - Tammy Wright, support specialist, arranges a display of clothing before the store opens at JC Penney at Northlake Mall on Wednesday, August 7, 2013. During the August 9-10 sales tax holiday, the following items will be exempt: Clothing with a sales price of $100.00 or less per item. HYOSUB SHIN / HSHIN@AJC.COM

August 7, 2013 Atlanta – Tammy Wright, support specialist, arranges a display of clothing before the store opens at JC Penney at Northlake Mall on Wednesday, August 7, 2013. HYOSUB SHIN / HSHIN@AJC.COM

This includes clothing and footwear with a sales price of $100 or less per item as well as computers, computer components, and pre-written software purchased for non-commercial home or personal use with a sales price of $1,000 or less per item.

Related: The sexy side of Georgia’s back-to-school sales tax holiday

The exemption excludes clothing accessories such as jewelry, handbags, umbrellas, eyewear, watches, and watchbands. Electronic accessories such as pre-recorded CDs/DVDS, cell phones, game systems and televisions are also taxable. See here for a full list of what is and is not tax exempt.

Georgia’s sales tax holiday is a popular event, but it is not the norm nationwide. This year, 17 states (mostly concentrated in the southern region) are conducting sales tax holidays, a slight drop from the peak of 19 states in 2010.

Read More: No sales tax this weekend on school supplies, clothes, computers

The event enjoys strong political support, but two researchers, Scott Drenkard and Joseph Henchman, say it is bad tax policy.

Their report, Don’t Buy Tax-Free Weekends, was released today by Georgia Public Policy Foundation.

Drenkard and Henchman note that tax holiday supporters have said the holidays improve retail sales and promote economic growth. Supporters argue that shoppers will buy more of the tax-exempt goods than they would have without the holiday and that consumers will impulse buy the non-exempt goods thereby paying taxes that never would have been collected.

But in 1997, when the New York Department of Taxation and Finance studied its clothing sales tax holiday, they found that while sales of exempt goods rose during the holiday, overall retails sales for the year did not grow.

In fact, shoppers waited until the sales tax holiday to buy exempted goods which slowed down sales in the weeks before and after the holiday. New York is one of the states that no longer holds a sales tax holiday.

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