Proposed Ohio sales tax holiday is poor policy

- December 2, 2014
   

 Policy Matters offers testimony in opposition of Senate Bill 243

 

For immediate release
Contact: Zach Schiller, 216.361.9801 

 

Ohio legislation that would enact a sales tax holiday for a weekend in August each year is misguided and insufficiently targeted, Policy Matters Ohio Research Director Zach Schiller said in testimony submitted to the House Finance and Appropriations Committee Tuesday.

Schiller said Senate Bill 243 is a step backward for Ohio tax policy.  “We know that the sales tax is a regressive tax, falling more heavily on lower- and middle-income taxpayers. However, a sales-tax holiday is more likely to help wealthier taxpayers, who are more easily able to shift the timing of their purchase,” he said.

“If the objective is to help lower-income Ohioans, a much better alternative is to adopt a sales-tax credit.”

Policy Matters Ohio reviewed that possibility in a report last year, which is available at http://www.policymattersohio.org/sales-tax-credit-apr2013. Such credits provide a set amount for each member of a family to offset some of the cost of sales or similar tax. Policy Matters’ review found that a credit modeled on one in New Mexico would help hundreds of thousands of Ohioans, in a targeted way.     

“Sales tax holidays have not been shown to promote economic growth. They have drawn opposition across the political spectrum,” Schiller said in written testimony.

He said the Legislative Service Commission has outlined that a sales-tax holiday would cost the state $36 million in General Revenue Fund revenue this fiscal year, were it in effect, and millions more for local communities in forgone local sales taxes and Local Government Fund revenue. “While the LSC notes there is some uncertainty in its estimate, Ohio does not need another poorly targeted tax exemption that reduces revenue for needed public services,” he said.

The bill has been approved in the Ohio Senate and is now being considered by the House committee.

 

 

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