OUR VIEW: Sales tax holiday for Ohio popular but costly proposal; Potential loss of $36 million in tax revenue is a high tradeoff

Our view Published:

Backers of a sales tax holiday tied to back-to-school purchases in August say it will give families a break on seasonal purchases while spurring sales for retailers.

The plan approved by the Ohio Senate calls for purchases of school supplies, clothing, computers and instructional materials to be tax-free on the first Friday, Saturday and Sunday of August. The tax break would cover purchases of up to $1,000 for computers, with lesser amounts for clothing and other items.

Other states have similar "holidays," some tied to the Christmas season, others during back-to-school time. They're popular with consumers -- everybody enjoys a break on taxes -- and retailers, but the savings really doesn't amount to a great deal for the average family. According to the National Retail Federation, the average family with children in school from kindergarten through high school spent roughly $700 on back-to-school items in 2012. That would translate to a savings of $38 if the Ohio sales tax holiday is enacted.

On the other hand, the Legislative Service Commission estimates that the state could lose up to $36 million in sales tax revenue because of the tax holiday, which would translate into a $1 million loss for local governments and up to $9 million from counties and transit districts across the state.

That's no small chunk of change. Like most of the "tax breaks" granted at the state level, localities end up paying the piper.

Sen. Kevin Bacon of Columbus, sponsor of the sales tax holiday, says that it could spur shoppers to buy items that are not tax-exempt, which could help offset some of the lost tax revenue. That's a possibility, but our guess is that true bargain hunters taking advantage of the holiday might well confine their purchases to those that are tax-free.

Sen. Mike Skindell of Lakewood, one of the two Senate foes of the sales tax holiday, said that if the idea was to give Ohioans sales tax relief, the state would have been better off not increasing the sales tax last year. That's a good point.

The Ohio House will consider final action on the tax holiday. Given the trade-offs -- a loss of $36 million in state revenues vs. a comparatively small savings for the average family -- we hope that the House takes a hard look at this proposal and puts fiscal prudence ahead of political popularity in making its decision.

Want to leave your comments?

Sign in or Register to comment.