Happy sales tax holiday!
Tennessee is in the middle of a three-day sales tax holiday aimed at giving parents some relief in buying back-to-school supplies for their children. Through Sunday, there will be no sales tax applied to purchases of such things as clothing, art supplies and computers. There is a maximum price of $100 per item to be exempt. Computers are exempt up to $1,500.
While it might sound like a good idea, the sales tax holiday is little more than a cruel gimmick.
Maybe that’s why fewer Tennesseans are willing to celebrate this holiday. According to state officials, Tennessee’s first sales tax holiday in August 2006 was the most popular one, costing the state $13.7 million in lost sales taxes and tax reimbursements to local governments. That figure had decreased to just $7.6 million in 2009, which represents a 46 percent drop from three years before.
What Tennesseans actually want is a holiday from suffocating high sales taxes every day of the year. Tennessee, with a maximum combined local/state sales tax of 9.75 percent, has the highest sales tax rate in the nation. Tennessee also taxes food, something that is exempted in 33 other sales tax states.
A sales tax holiday offers only temporary relief to a burdensome tax system that Tennesseans for Fair Taxation says is one of the most inequitable and plainly unfair tax systems in the nation. TFT says a family in Johnson City making less than $22,000 a year pays more than three times the taxes as a portion of its income than families with much higher annual incomes.
The Tennessee General Assembly agreed earlier this year to a quarter-cent decrease of the state sales tax on certain groceries. That was, at best, a modest start to addressing the problem.
The fact remains that Tennessee government operates on a sales tax system held hostage to the ebb and flow of the economic cycle. What good would it do to remove the sales tax on food today if an economic downturn forces lawmakers to restore the very same tax in a year or two?
A more sensible approach to solving the problem of high sales taxes would be for lawmakers to reform the state’s antiquated tax system. Such reform would allow the state to significantly scale back an oppressive sales tax that weighs the heaviest on poor Tennesseans struggling to feed and clothe their families.
Unfortunately, few lawmakers in Nashville are eager to discuss the idea of realistic tax reform. As we’ve said in this space many times before, legislators appear perfectly content with gimmickry in the form of a three-day sales tax holiday that only reaffirms what many Tennesseans already know: The sales tax is too high in this state.