BRACK: Sales tax holiday remains inane tax bribe

By Andy Brack  |  It’s THAT time of the year again – the time when the state’s big political bribe to South Carolina voters is in full view to keep them in line with the establishment. 

Yes, from Aug. 2 through Aug. 4, South Carolina celebrates the 2024 Tax Free Weekend – an annual sales tax holiday  that started in 2000 to allow shoppers a way to catch a little relief at cash registers as they buy all sorts of back-to-school items.  

Things they don’t pay the state’s 6% sales tax plus local option sales taxes on:  Bedding, blankets, pillows, sleepwear, towels, wash cloths, shower curtains, diapers.  None of which make much sense.  Things that do make sense: Clothing, shoes, books, bookbags, lunchboxes, computers, printers, software, calculators and school supplies like pencils, paper, pens, binders and notebooks.

And then there is the list of things that aren’t tax-exempt on this very special holiday weekend, some of which sound like they should be exempt but aren’t: Briefcases, wallets, cell phones, smartphones, glasses, contacts, sports equipment and more.  But other items do actually make sense to not be part of the sales tax holiday: Cleaning supplies, business computers, furniture, jewelry, mattresses and box springs, office supplies, and video game consoles.  

When all was said and done, shoppers last year purchased more than $30 million of tax-free items, which caused the state of South Carolina to lose $1.8 million in sales tax revenues, according to the S.C. Department of Revenue.  In the two decades the state has held the tax-free weekend, it has lost more than $50 million in sales tax revenues, which most people would agree is real money.  Think of what could have been done with that.

Bottom line:  The sales tax weekend is a gimmick to make politicians who won’t craft a smart tax policy seem like they care about shoppers.  It’s just not a fair way to give a tax break to someone.  A few years ago, we called tax-exempt weekend nothing more than lipstick on a pig.  Still is.

Wouldn’t it be better to figure out a way to provide a longer-lasting tax break throughout the year?  You might wonder how.  Easy:  Lower the state’s uber-regressive 6% sales tax by a couple of pennies with cuts to the 80+ special interest sales tax exemptions offered to businesses throughout the year.  Makes sense, but politicians don’t really want to annoy those special interests.  

Or maybe state leaders could stop obsessing about the income tax – which tends to be paid by people who can afford it.  Maybe they could more evenly apply sales taxes to services to relieve the regressive burden of sales taxes and lower that rate.  

The sales tax holiday has another big problem – most people don’t take advantage of it because they forget, don’t realize it existed or aren’t even in the state when it’s happening.  The fairness of any sales tax holiday is always in question when its application is inherently uneven.

The tax-free weekend also is a problem for businesses, according to the Tax Foundation:  “Rather than stimulating new sales, sales tax holidays simply shift the timing of sales.”  That said, most businesses experience slumps after such holidays, which owners complain cuts into steady, reliable, consistent sales that impact cash flow and inventory.  In short, sales tax holidays make it tougher for businesses to do business.

From a policy perspective, “there is little economic justification,” the Tax Foundation argues, “for why a product purchased during one time period should be tax-exempt while the same product purchased in another time period should be taxable.”

South Carolinians save less than a dollar per person during the sales tax holiday weekend.  Urge your legislators to be smarter about how they craft tax policy, instead of  smearing lipstick on that pig to con voters into thinking they’re getting something really important.

Andy Brack is editor and publisher of Statehouse Report and the Charleston City Paper.  Have a comment?  Send to:  feedback@statehousereport.com.

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