(The Center Square) – Tennesseans will get a tax break when shopping for back-to-school items later this month, but one organization said they may do more harm than good.
The annual sales tax holiday is the last weekend of the month, July 25-27.
The sales tax will be removed from clothing items less than $100 and computers less than $1,500.
“Tennessee’s strong track record of fiscal stewardship has allowed our state to cut taxes and put dollars back in the pocket of hardworking Tennesseans,” Gov. Bill Lee said. “I encourage every family to take advantage of back-to-school savings, and thank the General Assembly for their partnership to provide direct financial relief for taxpayers.”
The Volunteer State has the second-highest sales tax rate in the country (Louisiana is No. 1), according to a report released this week from the Tax Foundation. The state sales tax is 7% but local governments can add a local sales tax of up to 2.75%. Tennessee’s combined average sales tax rate is 9.61%, the organization said.
Sales tax holidays are used by other states to not only reduce taxes on school supplies, but on other items. For example, Florida removes taxes from recreational equipment, according to the Tax Foundation.
Some states, like Georgia, no longer have sales tax holidays before school starts.
The Georgia Senate approved a bill earlier this year that would remove the sales taxes from firearms, ammunition and accessories for 11 days. The bill failed to make it out of a House committee.
The Tax Foundation called the sales tax holidays “harmful” from a political standpoint.
“They create space for politicians and regulators to pick political favorites in the process of selecting eligible products,” the organization said in a report published last year. “They also pave the way for lobbyists to solicit policymakers in hopes of securing a sales tax holiday exemption for their products. Because small retail businesses often lack resources for lobbying, and because there is no way for legislators to perfectly know what consumers want.”
The tax holidays often hurt the people they intend to help, the Tax Foundation said.
“They inject unnecessary instability into government and business revenue streams; create administrative and compliance costs for businesses, governments, and consumers; and do not promote long-term economic growth,” according to the report.
