November 23, 2008
Augusta Chronicle (SC) Interviews Tax Counsel Joseph Henchman on the State’s Gun Sales Tax Holiday
"Critics Say That Sales Tax Holiday Makes Code Too Complicated"
By Sarita Chourey
Increasingly, states are forgoing tax holidays because exemptions were cutting too deeply into revenues, says Joe Henchman, a tax counsel for the Washington-based Tax Foundation, a nonpartisan research group.
The last back-to-school tax holiday approved by the Maryland Legislature was in 2006, said Joe Shapiro, a spokesman for the Maryland comptroller.
"Based on the economy, can the state really afford it?" he said.
The Maryland Legislature set the next tax holiday for 2010. Mr. Shapiro said the public was probably asking for the back-to-school tax holiday, but lawmakers knew the state couldn't afford to give up the revenue, so to appease constituents, they set the tax-free period farther down the road.
The gun-tax holiday is expected to cost South Carolina only $15,000 in revenue this year, according to state Budget and Control Board estimates. Sales tax collections typically provide almost 40 percent of general fund revenues for state government.
Though sales-tax revenues are down in South Carolina—16 percent less was collected last month than in October 2007—that's not what rankles critics.
The problem, Mr. Henchman said, is exemptions make the tax code unnecessarily complicated.
"The reason they have them is to spur spending on one specific day," he said. "But the fundamental purpose of taxes is to raise revenue for government programs, not to micromanage a complex market economy ... and not to pick winners and losers."
Mr. Henchman said lawmakers typically introduce sales-tax holidays to curry favor with constituent groups.
"It makes them seem like they're cutting taxes," he said.
