Illinois Can't Afford Back-to-School Sales Tax Holiday

By Chuck Sudo in News on Aug 7, 2011 2:00PM

How deadbeat of a state is Illinois? So much so that the state won't be offering a sales tax holiday for back-to-school sales this year because we need the money to pay bills.

Suspending the sales tax holiday may not be a bad thing. They're evidently great for retail sales but the Institute on Taxation and Economic Policy says http://www.timesnews.net/article/9034508/critics-say-tax-free-holiday-benefits-mostly-wealthy-families">sales tax holidays mainly benefit wealthy families who have the discretionary income and flexible schedules to take advantage of them.

Instead, the tax think tank recommends states reduce their sales tax rates or offer sales tax credits to middle and lower-class families on state income tax returns if they truly want to give them a break. An example of how much tax revenue a state loses with a tax holiday is Louisiana, which forfeits $3.7 million when they offer a back-to-school sales tax holiday. At a time when state fiscal budgets are tightening across the nation, that loss of revenue leads to cuts in services and programs elsewhere.

ITEP analyst Matthew Gardner said, "The striking thing about sales tax holiday laws is that policy people all over the ideological spectrum agree they're a dumb idea." Yet politicians continue to offer them because they're popular with voters.