Lessons from the News
A strange new holiday season has just passed - the Sales Tax Holiday.
Earlier this fall, we've noticed several stories in the news about the sales tax holidays that a number of states have implemented during the customary back-to-school shopping period. These made us stop and wonder about the "framing" that is going on in these stories and how insights from our government research might be applied.
What does the very notion of a sales tax holiday communicate to the public about government and about taxes?
And how did government become just another place for rebates?
A little background
According to the Federation of Tax Administratorssales tax "holidays" were first instituted in New York in 1997, and are designed to "provide relief to taxpayers by instituting a temporary sales tax exemption on certain items for a specific period of time. The holiday typically occurs in August, the traditional back-to-school shopping period, and generally applies to merchandise connected with the new school year, particularly clothing, footwear and computer equipment."1
Most states try to target the tax break somewhat by placing a ceiling on the price of eligible merchandise; typically, $100 to $300 per clothing item sold and $1,500 to $4,000 for computer equipment. Any item priced under the ceiling can be purchased tax-free for the duration of the holiday. In 2006, fifteen states had various versions of this "holiday."2
What is this about?
It may be not all that surprising that in an era saturated with anti-tax, anti-government messages that states would seek all sorts of ways to offer up "tax breaks" and "tax relief." But, this particular policy is notably insidious for a number of reasons.
The "Holiday" Frame: Think about the framing inherent in the title of this tax policy - "Sales Tax Holiday." What message do we get? Holidays are good. Things we take holidays from are drudgery at best, outright burdens at worst.
Sold as Tax break for Working Families: Most of these "tax holidays" were designed and promoted as offering a tax break to working-class families. The definitions of the eligible items and caps on the amounts touted are targeted to low and moderate income families who bear more of the burden of sales taxes. These aspects have lead politicians and others who might think twice about supporting other types of selected tax breaks to actually support sales tax holidays. Interestingly, what is seldom examined is the loss of tax revenue to support public programs that directly benefit working families.
Questions about the Fiscal Wisdom of these "holidays:" The Federation of Tax Administrators, a national trade group whose members include the principal tax collection agencies of in the states, even raises questions about the fiscal wisdom of these "holidays."
In their recent update, State Tax Holidays: Tax Holidays Return to Favor, there are some interesting tidbits:
Though the concept's qualitative benefits have been questioned, sales tax holidays have been unilaterally embraced by politicians and taxpayers alike. In fact, the holiday idea seems to be immune to the skepticism of those that argue it simply isn't sound financial policy.
State legislatures see the tax holiday as a way to alleviate the tax burden on working families, as well as a means of jump-starting local retail businesses. Critics of the tax holiday, however, see the policy as a gimmick, and less helpful to the consumer than proponents claim. For instance, if a family spends around $250 on back-to-school clothes, and we factor in an average 6 percent sales tax exemption, then the exemption represents $15 of total tax savings.
State lawmakers on both sides of the party fence support their holidays; Republicans like them because they fit into the agenda of cutting taxes, while Democrats use them to show their advocacy of the working class.
Critics, on the other hand, argue that the holidays represent a modern day "breads and circuses," playing off peoples' emotional reaction and pushing the real issue of sound fiscal policy out to the periphery.
By promoting the holiday, the states are blinding the taxpayers to the reality of the other 51 weeks in a year, according to dissenters. Beyond that and more to the point, a sales tax holiday is not a particularly efficient means to providing financial assistance or relief to lower-income taxpayers. 3
The Merging of Retail Marketing and Tax Policy: Another troubling aspect of these tax "holidays" is how seamlessly public tax policy has been merged with retail marketing strategies. When government is treated as a point of purchase, what's-in-it-for-me transaction, it becomes increasingly difficult to remember that there are things in society that we all hold in common. Our research has shown that the dominance of a consumer mindset in our society is linked deeply to the disconnect people feel from the larger mission of government. When in a "consumer" mindset, one fails to recall both the rewards and responsibilities of being a "citizen." This dominant consumerist mindset fails to hold a notion of stewardship, of the interactive relationship we have with all the public structures and systems around us. Lost in "consumer think" Americans treat government as a vending machine, not as a collectively-held institution that we depend on and that requires our support.
No Mention of Lost State Revenue: In an August 3, 2006 USA Today story, "More states giving holiday from sales tax," Texas Comptroller Carol Strayhorn's quote is emblematic of state officials who fail to mention the loss of sales tax revenue an aspect of the "holiday." Strayhorn, instead, calls the sales tax "holiday" a "win-win" for the state of Texas.
"Texas Comptroller Carole Strayhorn says she thinks Texas businesses make money on Texas' tax holiday because it attracts shoppers from Louisiana and Oklahoma. "It's win-win for the state," says Strayhorn, a Republican who is running for governor as an independent. "It gives us an economic shot in the arm."
Not one of the numerous stories about tax holidays we reviewed even mentioned the amounts of lost state revenue from this tax policy, or offered a comparison of what that level of revenue could have supported in increased funding to schools, public parks and infrastructure, or a myriad of public services. This begs the question: "just what are we taking a holiday from?"
Take a Stand against Tax Holidays
Some of us may shrug and suggest that these tax holidays are highly popular, and we should just try to make sure they are as targeted as possible to low- and moderate-income families.
We would disagree. We believe our real task--exactly because they are popular--is to directly challenge the notion that these "holidays" are a good idea at all. Even buying into the rhetoric and purported purposes of breaks for low income families reinforces the framing. Using this language implies holidays are good, things we take holidays from--in this case, taxes--are not.
Additionally, we should take every opportunity to remind the reader/listener of the state revenues that have been lost and the irony that this purported "back to school" benefit actually undermines support for schools and other essential public structures.
The notion of a tax holiday also reinforces the idea that there is some big blob of government out there always ready to take our money. Thank God someone gave us a holiday from "them/it." Making what government is and does more concrete and helping connect taxes to the support and maintenance of the public structures and systems we all rely on is another important task.
Seen in this light, Sales Tax Holidays are not only bad tax policy they offer an opportunity for advocates for the public sector to challenge directly negative framing about government. When next school season rolls around, let's all be prepared to engage in this debate in new and compelling ways.
Let's ask the basic question: "Just what are we taking a holiday from anyway?"
1 Federal Tax Administrators. "State Tax Holidays: Tax Holidays Return to Favor." Updated: August 2005.
2 Ibid.
3 Ibid.