redneck-home-improvement

Check out a study  that calls sales tax holidays poor tax policy.

With a number of states wrapping up back-to-school sales tax holidays, the Tax Foundation, which describes itself as a nonpartisan organization that monitors fiscal policy at the federal, state and local levels, called such exemptions “nothing more than political gimmicks that do little to help consumers.”

The Tax Foundation said such ”holidays,” which the group said amount to a 4 to 7 percent price reduction for consumers for only a brief period, simply favor certain industries over others and increase tax code complexity. In some cases, some retailers simply raise prices during a “holiday,” effectively absorbing the benefit, the group said.

“If a state must offer a ‘holiday’ from its tax system, it’s a sign that the state’s tax system is uncompetitive – something that must be addressed with permanent reform,” Tax Foundation staff economist Mark Robyn said in a statement.

“In order to provide lasting relief to consumers, policymakers should cut the sales tax rate year-round, while broadening the sales tax base to include all goods and services would ensure that government would be able to raise necessary revenue in the least economically distortionary way,” said Robyn, one of the report’s authors.

In citing how the states pick winners with the tax holidays, the Tax Foundation cited Virginia’s hurricane-preparedness sales tax holiday, which applied to cell phone chargers but not laptop chargers and duct tape but not masking or electrical tape.

States have resorted to such tax breaks as a way to boost consumer outlays at a time when the recession has led to a clampdown on their spending.

While there are signs that recession is easing — new jobless claims fell – consumers are still wary. Global Hunter Securities expects holiday retail sales from November 2009 through January 2010 will finish in the range of up 1 percent to down 1 percent compared with a 7.6 percent decline the year before.

Also in the basket:

American Eagle quarterly profit plunges

Diageo cuts target as sees recovery only by 2010

Fred’s Q2 profit matches Wall Street

‘Clunkers’ Sequel Rattles Appliance Producers (Wall Street Journal)

Coconut Water Bubbles (Wall Street Journal)

(Reuters photo)

          

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