Is Ohio's Sales Tax Holiday a Good Idea?
Ohio shoppers had a chance to save money over the weekend with a sales tax holiday on school supplies. But the perennial August event is drawing some criticism both from economists and some parents.
Many stores were packed over the weekend with parents and students preparing for another school year. The crowds were a bit larger than usual because of Ohio's sales tax holiday: for the third year in a row, lawmakers rescinded the 5.75 percent tax on items like clothes under $75 and school supplies under $20. Fifteen other states have similar events each year, usually to encourage people to shop and save money. But critics -- such as Michigan State Economics Professor Charley Ballard -- are questioning whether it’s worth the loss of revenue for the state.
“Many states really have not been able to fund a lot of things that are high priorities for their citizens like fixing transportation infrastructure, like providing for higher education and for K-12 education. And in that budgetary environment, any time you give away tax revenue, that creates two difficult choices. Either you have to cut spending – and then you have to figure out what you’re going to cut – or you have to raise taxes on somebody else.”
Following the crowd
Those factors have led to a number of states dropping the sales tax holidays in recent years. The non-partisan Institute on Taxation and Economic Policy estimates states could have collected a total of $300 million more last year without the holidays. In Ohio alone, one study puts that number at more than $3 million while another pegs it closer to $15 million. Either way, Ballard says that’s not helping the states, and it may not even be helping the people it’s intended for.
“Often these things are portrayed to the public as, ‘hey, we’re helping the cash-strapped, low-income parents.’ To an extent, they are, but the folks who spend the most at back-to-school time are the more affluent. Most of these things are not means tested, so often most of the benefits go to the affluent people.”
One argument in favor of the holidays is that, across-the-board, shoppers often buy more than just supplies. Shannon Henderson from Kent left Wal-Mart in Streetsboro on Saturday with some groceries along with items for her five kids.
“Binders, notebooks, paper, pencils, glue. Everything that was on their list. I spent $124. So, imagine that with tax; I would have probably paid at least $150.”
Fighting the crowds
But some shoppers, like Tanya Beaulieu from Newton Falls, exited the store with no school supplies at all.
“Cat food and cat litter.”
She says her family also visited Aurora Outlets – to make a return – and it was too crowded to shop for clothes.
“I don’t really think it’s worth it. The lines are a mile-long. We bought some already, but we’ll probably go out again next weekend and get some. It won’t be so packed; it will be easier to shop. That, and a lot of things are picked over.”
David Ittel wishes his Mother felt that way. He ambled up to the Wal-Mart a short time later. The spiky-blonde-haired seventh-grader from Mantua carried a fishing pole and wore Ray-Bans, looking like a real-life Bart Simpson.
“I don’t really think it’s that big of a deal to pay 6 percent more tax.”
The wave of the future
Ittel says every year, his parents have to buy him more and more electronics for school. He wonders if someday his supply list will be just an iPad and a backpack – making the tax holiday in its current form irrelevant. His Mother, Mikala, has mixed feelings about that.
“I don’t think everything needs to be so [technological]. I mean, the boys have fishing poles so let them get out and be kids and do things and get off the technology all the time. I would be okay if we kept some of the traditional stuff.”
Charley Ballard from Michigan State says that’s probably what will happen.
“I don’t think pencil and paper are going to go away completely. In fact, I kind of long for the day when my students had to have penmanship instruction. Because when I give an essay exam, then I have to read this stuff.”
Mary Davis from Stow had to buy her daughter some electronics including an $86 graphing calculator, which was not exempt from taxes, adding $5 to the price tag. She also bought some tax-exempt supplies, but she knows she’ll eventually return and buy more at full price at some point.
“We just got the bare necessities right now. We still have to wait till she goes to school and then they’ll give us the list of things she really needs.”