Monday, August 07, 2006

Sales Tax Holiday Gains Illusory

This past weekend was a big one for state sales tax holidays.

National Retail Federation spokesman Craig Shearman summed up the fake consumer benefits like this:

"Americans have hated paying taxes going back to the Boston Tea Party, and when they have an opportunity to avoid it, they love it," he said. "The psychological appeal far outweighs the amount of money being saved."

Any day now, Kentucky will be getting a pre-filed bill to institute one of these sales tax holidays. The Christmas-like feeding frenzy traffic is way out of proportion to the amount of actual consumer saving occurring. The hype just doesn't play out to the advantage of consumers.

What's interesting is some states report increased sales tax revenue during sales tax holidays because eager shoppers buy more things that aren't exempt from the tax than they normally would.

Sheep get sheared, as usual.