Scoppe: This ‘holiday’ deserves a big, fat ‘Bah! Humbug!’

Associate EditorAugust 1, 2013 

— IT’S AUG. 1, which means we are just hours away from that most special time of the retail year: Time to drop whatever we’re doing and brave the crowds to purchase those items that the Legislature has decided to reward us for purchasing.

Unless you’re not crazy about artificially induced crowds.

Or being manipulated by legislators, who use our tax dollars to entice us to purchase what they want us to purchase, under the terms they dictate.

Or the idea of a pandering tax policy that masquerades as a gift from legislators and doesn’t really benefit anyone very much but does make it a bit less likely that they’ll ever produce the significant tax reform they love to talk about and do nothing to achieve.

Legislators say the purpose of the annual Back to School Sales Tax Holiday is to give a break to parents trying to ready their children for the start of classes. It’s not. If it were, it would apply only to items that parents need to purchase to send their kids back to school. You know, the notebooks and pencils and backpacks and school clothes and even dorm-room supplies that are on the no-tax list. But not the wedding gowns. Or the diapers (baby or adult varieties). Or the corsets and corset laces, formal clothing (including tuxedos) and furs. Or any of the many other items that just don’t quite fit on that back-to-school shopping list.

If the purpose of the tax holiday were to make it easier for parents to send their kids back to school, then it would apply only to … parents sending their kids back to school. Instead of anyone who wanders out into the hoards of people who concentrate all of their July and August shopping into a single weekend. Or logs on to a retail site that collects S.C. sales taxes.

But of course making the distinction between parent and non-parent would be ridiculously difficult for retailers (proof of school-age children required to qualify for exemption), so the only way to limit the tax break to parents would be to just send a check to every parent. Which our Legislature doesn’t want to do, because it would be expensive, it would be welfare-like and it would make it perfectly clear just how piddling this gift is. Besides, that would eliminate the other big benefit of the holiday: making retailers think the Legislature has given a great gift to them.

This whole holiday is, in short, a scam, created by legislators to con parents and retailers into thinking they have given them something.

Writing last month on USNews.com, George Mason University’s Christopher Koopman noted that since tax-free holidays apply only to “a special list of goods selected by the state, with every special interest hoping to get their turn,” the result is “a situation where these back-to-school sales tax holidays have grown far beyond back-to-school items, and … end up being the product of political maneuvering.”

It’s difficult to argue with that premise. How else do we explain the fact that since legislators created their version of Christmas in August back in 2000, they have done nothing to eliminate such ridicule-inducing tax exemptions as the ones on wedding gowns and diapers?

Now, I don’t have a problem with the government influencing market decisions, of picking winners and losers, as critics on the right complain. I just expect it to do so in a way that advances the goals shared by a broad spectrum of society — putting high taxes on cigarettes, for instance, to deter teen smoking, or giving tax breaks to companies that create good-paying jobs in high-unemployment counties. The sales tax holiday doesn’t do any of that.

How does our state benefit when people buy (untaxed) pocketbooks and purses but not (taxed) change purses and wallets? Pillows and pillowcases but not the alarm clock on the nightstand next to them? Wet suits but not goggles? Roller skates that are permanently attached to the boot but not roller skates not permanently attached to the boot?

For that matter, how does our state benefit when people buy back-to-school items during the first weekend of August rather than the second, or the last weekend in July, or midweek?

The Tax Foundation, a Washington think tank that lobbies for lower taxes, points to studies that show that unlike other tax breaks, tax holidays distort the market without any offsetting economic benefit. Rather than enticing people to spend more money, they simply entice people to shift their spending to a different time. Hence the crowds.

And worse, “Political gimmicks like sales tax holidays distract policymakers and taxpayers from genuine, permanent tax relief,” the foundation argues in its latest annual critique of the tax holidays. “If a state must offer a ‘holiday’ from its tax system, it is a sign that the state’s tax system is uncompetitive. If policymakers want to save money for consumers, then they should cut the sales tax rate year-round.”

South Carolina could certainly benefit from that. Unlike most of our taxes, our sales tax has indeed become uncompetitive, growing since the holiday’s inception from 5 percent to 6 percent statewide, with additional local sales taxes mushrooming, to make 8 percent taxes no longer uncommon. If we didn’t have such an outrageous list of year-round exemptions, we could cut that state tax back down to 5 percent, or even 4 percent, and bring in the same amount of money. If our Legislature would treat city and county councils like the duly elected governments they are, we might not have to have so many local sales taxes.

Of course our legislators have shown no inclination for making any such changes. Nor can we expect South Carolina to join the list of states rethinking the back-to-school holidays — which are down to 17 from 19 in 2010, and soon to be 16, after North Carolina’s governor signed a law last month that reduces income taxes in return for imposing the sales tax on some exempt items and eliminating the holiday.

But at least we can take solace knowing that our lawmakers are equally unlikely to go the way of Louisiana, which, Mr. Koopman notes, “has broadened its list to cover all consumer purchases of personal property up to $2,500 per person, which includes guns, ammunition and other hunting supplies.” Because here in South Carolina, we’ve got more sense than to lump guns and ammo into a back-to-school tax holiday: They get their own separate no-tax holiday.

Ms. Scoppe can be reached at cscoppe@thestate.com or at (803) 771-8571. Follow her on Twitter @CindiScoppe.

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