Gimmicky Sales Tax Holidays Are Short-Term and Ineffective

Temporary holidays on state sales taxes fail to offer the meaningful tax relief that struggling families need, and they undermine funding for education, infrastructure, and other public services, says Marco Guzman of the Institute on Taxation and Economic Policy.

Everyone loves a deal, so it’s no surprise why the appeal of the state sales tax holiday continues to persist. This year, 20 states will forgo more than $1 billion in combined revenue to enact a variety of sales tax holidays that—like most things that are too good to be true—will do little to provide meaningful benefits and instead undermine funding for public services.

Sales taxes are an important revenue source, making up close to half of all state tax revenue. But they’re also inherently regressive because low-income families spend a greater share of their income on goods and services subject to the tax compared to their wealthier counterparts.