Sales Tax Holidays Don’t Benefit Low-Income Families

tax holidays

Sales tax holidays are right around the corner and are a great way for consumers to save money and get the items they need for their children. However, a report from the Washington-based tax policy research center Institute on Taxation and Economic Policy, suggests that the only folks really benefiting from it as the wealthy shoppers.

No matter what state the sales tax holiday is in, the sales taxes fall mainly low-income families, with them spending most of their money on the consumable items.

According to the report, sales tax holidays offers a two-to-three day break on taxes for clothing and school supplies, providing a better benefit for those who can afford to spend more on these items.

There are 17 states that will offer sales tax holidays.

A 2010 Federal Reserve Bank of Chicago study noted there was no significant change in buying for households that made $30,000 or less each year during this holiday. Households that made $70,000 or more a year tended to buy more clothes by 48 percent.

The report said wealthy taxpayers are in a better position to take advantage of the holidays – to change their spending habits to benefit from it. This option isn’t ideal for families who live from one paycheck to the next.

The report said the tax breaks will cost over $300 million, and are a serious income drain for cities that host them. The report suggests a refundable credit or earned income tax credit may be a suitable alternative.

The sales tax was created with an idea of how much the average amount families pay.

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