Monday, April 12, 2021

WisGOP sales tax holiday gimmick returns! And it's dumber than ever

While the GOPs in the State Assembly will talk a lot tomorrow about what do to with the extra federal money heading to Wisconsin, they also have some ideas on what to do with the already-existing state budget surplus. And that’s in the form of a sales tax holiday for the Summer.
Under this bill, beginning on June 1, 2021, and ending on August 31, 2021, the sale of tangible personal property and taxable services sold at any licensed brewpub in this state or at any business that has as its primary business activity in this state an activity classified under the North American Industry Classification System as a motion picture theater, including a drive-in theater; a tavern, restaurant, or other food service establishment; or an amusement park or arcade is exempt from the state sales and use tax. The exemption also applies to the county sales and use tax, the sales tax imposed by a premier resort area, and the food and beverage tax imposed by a local exposition district. Under the bill, if a business did not classify itself on or before March 1, 2021, as an establishment that would qualify to offer the exemption, the business may apply to the Department of Revenue to be classified as one of those establishments for purposes of offering the exemption.
The idea seems to be that getting rid of sales taxes for these industries will encourage more people to go out because it’ll be cheaper for them to do so. But is that really going to work?

We’ve been here before. Former Governor Walker put in a sales tax holiday in August 2018 as a pre-election gimmick to try to stay in power. It didn’t work in keeping Walker in office, and it didn’t do much to help the Wisconsin economy.

UW-Madison graduate Renu Zaretsky organized information on sales tax holidays in 2019 for the Tax Policy Center, and said that it while may give small benefits to some people on the margins, it doesn’t lead to significant changes in activity.
Not everybody can shop during a state’s scheduled sales tax holiday. My Tax Policy Center colleague Richard Auxier notes that in fact “the holidays are more beneficial to affluent shoppers, who have the means to change the timing or amount of their purchases.”

Or, as one busy parent of two sons acknowledged, “I would try to take advantage of it, but something would happen to distract me.” Another parent of two daughters who are busy on weekends with sports, “What if we’re not ready to buy supplies during the scheduled holiday? It might be hard to reap benefits.”

The holiday may help shoppers, but not the overall economy. Richard explains that tax holidays are more likely to shift the timing than increase total consumption. If Illinois adopted a tax holiday, my friend would not likely buy more pencils or more shirts. As a result, a tax holiday does little if anything to increase overall economic growth.

There’s no holiday for tax administration—by retailers or state employees. The Tax Foundation explains how sales tax holidays can make collections more complex. Retailers must reprogram registers and computers to comply with the temporary tax changes. Depending on a state’s regulations, they may have to operate under multiple sales tax laws in a single year. “For example,” explains the Tax Foundation, “Mississippi’s sales tax holiday regulations prohibit the sale of individual shoes [evidently to avoid common holiday price caps], permit the use of coupons, prohibit layaway sales but permit rain checks, and exclude shipping costs from the holiday.”

As one friend put it, a sales tax holiday “might be more of a royal pain in the [rhymes with glass].”
Also worth noting, the sales tax holiday bill cuts local sales taxes, which would take away a large amount of revenue for many tourist towns that rely on the Summer season to pay their bills for the rest of the year. Which might help explain why opposition to this sales tax holiday is coming from some interesting places.

When the Dells Visitors and Conventions Bureau doesn’t like your plans to boost tourism, maybe you should take a step back. And the Tavern League support likely tells me who came up with this idea of this targeted sales tax holiday. Just clueless, selfish dopes.

I understand that eating and drinking places and other touristy-entertainment places need help in Wisconsin after a year in the COVID World. But that’s already happening in the form of state and federal subsidies for many of those types of businesses. You can cut 5.5% (or 7.25% in the Dells) of sales taxes off of the cost of dining out, but you need people to want to dine out in the first place.

And that’s not going to happen until we have more people vaccinated and have fewer morons in communities taking on high-risk behavior and keeping COVID around. So maybe concentrate on that instead of a pointless “tourism-based” sales tax holiday that would rob communities of revenue they need in order to be attractive enough to make others want to visit.

1 comment:

  1. Looks like the LFB did estimate the price tag of this sales tax holiday. Looks like it is around $160 million at the state level and $12.6 million at the county level.

    Another interesting stat in this LFB paper is that is estimated that among businesses that would get the sales tax holiday, more than 1,000 fewer businesses sent in sales tax returns in December 2020 vs December 2019.

    But as I said before, I can't think a 5.5% discount is going to spur that much more business in these places. Especially if COVID is still any kind of a thing this Summer.