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State's sales tax holiday paltry relief for taxpayers

Comprehensive tax reform more meaningful solution

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The holiday shopping marathon kicked off this weekend with a one-time gift for shoppers in South Carolina -- 48 hours of no state sales tax on a wide variety of items. But is this the tax relief taxpayers deserve?

As part of property-tax relief passed this year, the General Assembly suspended the 5 percent state sales tax for the two days after Thanksgiving. It seemed to be penance for increasing the sales tax to 6 percent to pay for property tax reform. Shoppers were expected to save $18 million over the two days, according to the South Carolina Board of Economic Advisors.

Unlike the tax-free weekend in August, which applied only to back-to-school items, this tax-free weekend was on everything one could buy in a mall or big-box retailer.

Such sales tax holidays are growing popular across the country. But Jonathan Williams, an economist with the Tax Foundation, a Washington-based watchdog group, says that such tax relief doesn't deliver real savings for consumers or boost sales for retailers. "According to the New York State Department of Taxation and Finance," he writes, "while the Empire State's first sales tax holiday increased sales during the period of the holiday, sales for the year were virtually unchanged. In other words, shoppers didn't buy more; they just shifted the timing of their purchases. ... Other studies indicate that retailers may in fact raise their pre-tax prices during the tax holiday, leaving consumers out of the full tax savings. As it turns out, sales tax holidays are more hype than anything."

A shift in the timing of purchases is likely what happened this weekend. Many folks have a holiday shopping list and a budget and probably adjusted the timing of their shopping more than the amount bought. Merchants' sales prices will do more to spur shopping than a temporary sales tax holiday.

Lawmakers cobbled together tax relief this election year, slashing school operating taxes from property-tax bills of resident homeowners, raising the sales tax from 5 percent to 6 percent on most goods and cutting the sales tax from 5 percent to 3 percent on grocery sales. On top of that, the property-tax reform bill authorized a study of the state's current sales tax exemptions, something that should been done before lawmakers looked to a sales tax increase to pay for property tax relief. It will be some time before we sort out all the ramifications.

Many can argue that any tax relief is welcome in South Carolina, which has the nation's second-highest unemployment rate, but consumers would have had to spend $100 Friday and Saturday to save $5. That seems unrealistic for someone out of work.

What South Carolinians need is real tax reform. Lawmakers should provide a lasting benefit, not a one-time reprieve. They should do that by scrutinizing the state's overall tax structure -- property tax, sales tax and income tax -- as well as the myriad local and state fees charged for various services.

A comprehensive effort could do a lot for taxpayers, and a better overall tax climate could help secure the jobs that the unemployed need.