Sunday, July 09, 2006

Give Me a (Sales Tax) Break

The Tennessean has an article today about the claim of critics that "sales tax holidays" provide no benefit to either businesses or consumers. That claim is not surprising. The sort of people who don't think that raising taxes has any adverse effect on the economy are also unlikely to imagine that reducing a tax -- even for one day -- will have a positive impact.

Proving that the famous axiom "those who can, do; those who can't, teach," is sometimes true, Georgetown University professor David Brunori explained the lack of benefit this way:

The consumer gets a wash, but they think they're getting a great deal. The politicians can walk around kissing babies and say they're bringing a tax break to the state of Tennessee.

One can only hope that Professor Brunori manages more coherence in the classroom. That the state of Tennessee is getting a tax break (for one day) is beyond dispute. If Brunori is making some sort allegation related to kissing babies, perhaps he should file charges.

Critics of the sales tax holiday also claim, without any evidence other than "anectdotal," that consumers don't reap any benefit because retailers don't discount prices, since they know that customers will come out for the event regardless. Oh, yes. Everyone knows that there are no discounts at times when customers are rushing out to the stores. Take Christmas, for example....

This sort of critic, in addition to not understanding the effects of taxes on the economy, also does not understand the concept of competition in the marketplace.

This is not to say that "sales tax holdidays" are a great idea. They are not, and broad based tax relief would make for better public policy. However, those who doubt the efficacy of a tax break for just one day likely won't believe that it will make any difference for the whole year, either.

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