Oklahoma

Economy, Energy, Natural Resources: Policy to People

Are Sales Tax Holidays Big Gimmicks?

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Retailers enjoy the uptick in back-to-school business, and customers can plainly see what they saved on the bottom of their receipts.

The celebration started today at 12:01 a.m., like it does on the first Friday each August.

Shoppers have until midnight the following Sunday to buy clothes and shoes (under $100 per article) tax-free. Oklahoma retailers have been required by law to participate in the annual Tax Holiday since 2008.

But the sales tax-free weekend is no different from every other holiday: Someone has to pay for the presents.

Reporter Joy Hampton filed a story in today’s Norman Transcript that questions the economic growth potential of the state’s Tax Holiday.

Retailers say the tax-free weekends attract big crowds and bring in new customers, one store owner told Hampton — a sentiment echoed by Norman’s budget manager, Suzanne Krohmer:

“This sales tax holiday attracts people that used to go to Texas,” Krohmer told the Transcript. “We’re attracting these people that wouldn’t come here otherwise, so I see it as a positive thing.”

But according to a report compiled by the Tax Foundation, a nonpartisan research group based in Washington, D.C., tax holidays like Oklahoma’s “do not promote economic growth” and “simply shift the timing of purchases.”

In the end, taxpayers end up picking up the tab. To supplement the lost sales tax revenue, cities and counties apply for reimbursement from the state tax commission, which uses a formula based on August sales tax figures from the previous year.

Former Rep. Wallace Collins (D-Norman), now the state Democratic chair, told Hampton that tax holidays are basically a gimmick.

“It’s a smoke-and-mirrors kind of deal,” Collins told the Transcript. “When it’s all said and done, you probably didn’t gain much of anything. You probably bought something you wouldn’t have, so maybe it helps the merchants, but it probably doesn’t help families.”

According to Hampton’s story, Norman’s reimbursement from the Oklahoma Tax Commission has increased every year: $89,082 in 2008; $93,624 in 2009 and $107,849 in 2010.

OTC records from 2009 — which city-county sales tax coordinator Dave Francis says is the most recent and complete accounting — show that the state disbursed $487,142 to counties and $2,602,215 to cities and towns throughout the state.

Top 10 Tax Holiday Reimbursement Recipients

County/Municipality Reimbursement
Oklahoma City $673,963
Tulsa $405,498
Tulsa County $164,919
Norman $93,624
Edmond $89,058
Lawton $69,397
Broken Arrow $58,869
Stillwater $50,565
Enid $47,389
Midwest City $46,799

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