July, 26 2011, 12:56pm EDT
Sales Tax Holidays: PR Bonanzas, Policy Boondoggles
While politicians in seventeen states prepare to reap the public relations benefits of sales tax holidays, the Institute on Taxation and Economic Policy (ITEP) is asking if these events actually achieve the benefits for working families and retailers their proponents claim.
WASHINGTON
While politicians in seventeen states prepare to reap the public relations benefits of sales tax holidays, the Institute on Taxation and Economic Policy (ITEP) is asking if these events actually achieve the benefits for working families and retailers their proponents claim.
"We just don't know if anyone really benefits from sales tax holidays," says Matthew Gardner, ITEP's Executive Director, "largely because there is no transparency or accountability. Of course politicians love the great PR, but with all the time they spend planning, promoting and implementing these events, they'd do better to focus on long term solutions with real benefits for more taxpayers."
Sales tax holidays are implemented with the goal of giving working families a break on spending, typically during the back to school season. Many have observed, however that other kinds of consumers benefit as much - if not more - from these holidays, including out-of-state shoppers and more affluent consumers with flexibility to spend whenever they like. And obviously, the more a consumer spends, the greater their tax savings, so sales tax holidays tend to reward those with the most money to burn.
To truly help so-called working families to make ends meet, ITEP endorses permanent reforms, including targeted tax credits which are more cost-effective because they ensure the benefit goes specifically to taxpayers the provision targets.
Targeted sales tax credits help compensate for the relatively high cost of basic necessities for lower income households. Using Bureau of Labor Statistics data, ITEP estimates that while the wealthiest families spend only one-sixth of their income on items that are subject to sales taxes, low-income families spend three-quarters of their income on taxable purchases. For households in the middle, about half of their income is spent on taxable items. Put differently, a six percent sales tax amounts to roughly a one percent income tax rate for families in the highest income brackets, a three percent tax on middle-income families and a 4.5 percent tax on the poorest families.
"This is what makes the flat sales tax a textbook case of a regressive tax," said Gardner. "A dollar costs a poor person more than it costs a rich person." Targeted sales tax credits generally give a flat dollar amount for each family member and are available only to taxpayers with income below a certain threshold. Eight states currently provide sales tax relief in this form.
Sales tax holiday are also promoted as a boon for a state's retailers because they are said to boost sales. Evidence supporting this claim is weak, and common sense suggests it may not be true. Incentive programs are more likely to merely shift the timing of purchases made than to motivate an unplanned purchase. "Cash for Clunkers," for example, was used to purchase about 690,000 new cars, but only 125,000 of those would not have otherwise been purchased during that six months period, according to Edmunds.com.
To level the playing field for retailers within their jurisdictions, lawmakers in seven states have begun requiring Internet-based retailers to collect state sales taxes for online purchases (if they partner with business based in those states to solicit sales). Growing numbers of consumers are migrating to the Internet and away from brick and mortar stores. This back to school season, nearly one third of families report they will shop online, according to the National Retail Federation.
"It also doesn't hurt," adds Gardner, "that state and local governments stand to gain billions in lost revenues if they start requiring online outlets to collect sales taxes from consumers."
If retailers and hard pressed consumers do benefit in any significant way from sales tax holidays, the burden is on lawmakers who implement them to demonstrate those benefits - and the costs. The recession has seen several states cancel or fail to renew their annual sales tax holidays because they couldn't afford the revenue loss. "There is sexy tax policy and popular tax policy, and then there is good tax policy," said Gardner. "Sales tax holidays are popular. Targeted tax credits and Internet transaction taxes are decidedly unsexy but they are great policy."
In anticipation of the sales tax holiday season, ITEP is releasing updated versions of its policy briefs on the relevant issues below at https://www.itepnet.org/policy_briefs/policy_briefs.php.
- Sales Tax Holidays
- How Can States Collect Taxes Owed on Internet Sales
- Progressive Options for Sales Tax Relief
- Applying Sales Taxes to Services
- Earned Income Tax Credit
Citizens for Tax Justice, founded in 1979, is a 501 (c)(4) public interest research and advocacy organization focusing on federal, state and local tax policies and their impact upon our nation. CTJ's mission is to give ordinary people a greater voice in the development of tax laws.
LATEST NEWS
'Discriminatory' North Carolina Law Criminalizing Felon Voting Struck Down
One plaintiffs' attorney said the ruling "makes our democracy better and ensures that North Carolina is not able to unjustly criminalize innocent individuals with felony convictions who are valued members of our society."
Apr 23, 2024
Democracy defenders on Tuesday hailed a ruling from a U.S. federal judge striking down a 19th-century North Carolina law criminalizing people who vote while on parole, probation, or post-release supervision due to a felony conviction.
In Monday's decision, U.S. District Judge Loretta C. Biggs—an appointee of former Democratic President Barack Obama—sided with the North Carolina A. Philip Randolph Institute and Action NC, who argued that the 1877 law discriminated against Black people.
"The challenged statute was enacted with discriminatory intent, has not been cleansed of its discriminatory taint, and continues to disproportionately impact Black voters," Biggs wrote in her 25-page ruling.
Therefore, according to the judge, the 1877 law violates the U.S. Constitution's equal protection clause.
"We are ecstatic that the court found in our favor and struck down this racially discriminatory law that has been arbitrarily enforced over time," Action NC executive director Pat McCoy said in a statement. "We will now be able to help more people become civically engaged without fear of prosecution for innocent mistakes. Democracy truly won today!"
Voting rights tracker Democracy Docket noted that Monday's ruling "does not have any bearing on North Carolina's strict felony disenfranchisement law, which denies the right to vote for those with felony convictions who remain on probation, parole, or a suspended sentence—often leaving individuals without voting rights for many years after release from incarceration."
However, Mitchell Brown, an attorney for one of the plaintiffs, said that "Judge Biggs' decision will help ensure that voters who mistakenly think they are eligible to cast a ballot will not be criminalized for simply trying to reengage in the political process and perform their civic duty."
"It also makes our democracy better and ensures that North Carolina is not able to unjustly criminalize innocent individuals with felony convictions who are valued members of our society, specifically Black voters who were the target of this law," Brown added.
North Carolina officials have not said whether they will appeal Biggs' ruling. The state Department of Justice said it was reviewing the decision.
According to Forward Justice—a nonpartisan law, policy, and strategy center dedicated to advancing racial, social, and economic justice in the U.S. South, "Although Black people constitute 21% of the voting-age population in North Carolina, they represent 42% of the people disenfranchised while on probation, parole, or post-release supervision."
The group notes that in 44 North Carolina counties, "the disenfranchisement rate for Black people is more than three times the rate of the white population."
"Judge Biggs' decision will help ensure that voters who mistakenly think they are eligible to cast a ballot will not be criminalized for simply trying to re-engage in the political process and perform their civic duty."
In what one civil rights leader called "the largest expansion of voting rights in this state since the 1965 Voting Rights Act," a three-judge state court panel voted 2-1 in 2021 to restore voting rights to approximately 55,000 formerly incarcerated felons. The decision made North Carolina the only Southern state to automatically restore former felons' voting rights.
Republican state legislators appealed that ruling to the North Carolina Court of Appeals, which in 2022 granted their request for a stay—but only temporarily, as the court allowed a previous injunction against any felony disenfranchisement based on fees or fines to stand.
However, last April the North Carolina Supreme Court reversed the three-judge panel decision, stripping voting rights from thousands of North Carolinians previously convicted of felonies. Dissenting Justice Anita Earls opined that "the majority's decision in this case will one day be repudiated on two grounds."
"First, because it seeks to justify the denial of a basic human right to citizens and thereby perpetuates a vestige of slavery, and second, because the majority violates a basic tenant of appellate review by ignoring the facts as found by the trial court and substituting its own," she wrote.
As similar battles play out in other states, Democratic U.S. lawmakers led by Rep. Ayanna Pressley of Massachusetts and Sen. Peter Welch of Vermont in December introduced legislation to end former felon disenfranchisement in federal elections and guarantee incarcerated people the right to vote.
Currently, only Maine, Vermont, and the District of Columbia allow all incarcerated people to vote behind bars.
Keep ReadingShow Less
Biden Labor Department Finalizes Pro-Worker Rules on Overtime, Retirement Savings
"Democrats are delivering for working people!" declared Rep. Pramila Jayapal as the AFL-CIO noted that GOP ex-President Donald Trump "gutted the rules that required overtime pay for millions of workers."
Apr 23, 2024
Roughly 4.3 million U.S. workers will now be eligible for overtime pay under a new rule finalized Tuesday by President Joe Biden's Labor Department—in stark contrast to his Republican predecessor's rules that severely limited the number of workers who were eligible for required compensation when they worked more than 40 hours per week.
Under the new rule, employers will be required to pay overtime premiums to salaried workers who work more than standard full-time hours if they earn less than $1,128 per week, or about $58,600 per year.
Former President Donald Trump, now the presumptive Republican presidential nominee, may now have to defend his 2020 rule that set the overtime pay threshold at just $35,500 per year, leaving out millions of workers.
U.S. Rep. Pramila Jayapal (D-Wash.) noted that the updated rule was "a major piece" of the Executive Action Agenda released by the Congressional Progressive Caucus, which she chairs.
"This is a HUGE pro-worker initiative by President Biden," said Jayapal. "Democrats are delivering for working people!"
Acting Labor Secretary Julie Su, who Biden has nominated to fill the role permanently, said it is "unacceptable" that lower-paid workers "are spending more time away from their families for no additional pay," while hourly workers are eligible for overtime pay.
"This rule will restore the promise to workers that if you work more than 40 hours in a week, you should be paid more for that time," said Su. "The Biden-Harris administration is following through on our promise to raise the bar for workers who help lay the foundation for our economic prosperity."
The Labor Department posted a chart on social media showing how under Trump's policy, only workers who earn less than $688 per week are eligible for required overtime pay. The full rule is set to go into effect in January 2025.
The chart offers a "good split screen with the GOP," saidSlate reporter Mark Joseph Stern.
"It isn't just that Trump's Department of Labor fought overtime pay—it's also that Trump appointed anti-labor judges who are about to block Biden's new rule," he said.
The former Republican president's appointed judges could also block a new Federal Trade Commission rule introduced on Tuesday, which blocks companies from including noncompete clauses in workers' contracts.
"Both reforms happened because of Biden and in spite of Republicans," said HuffPost labor reporter Dave Jamieson.
Along with the overtime rule, the Labor Department announced a new policy aimed at safeguarding people's retirement savings from their financial advisers' conflicts of interest.
The finalized retirement security rule requires "trusted investment advice providers to give prudent, loyal, honest advice free from overcharges," said the department. "These fiduciaries must adhere to high standards of care and loyalty when they recommend investments and avoid recommendations that favor the investment advice providers' interests—financial or otherwise—at the retirement savers' expense."
"Under the final rule and amended exemptions, financial institutions overseeing investment advice providers must have policies and procedures to manage conflicts of interest and ensure providers follow these guidelines," the agency said.
Liz Shuler, president of the AFL-CIO, said the nation's largest labor federation has "been pushing for the fiduciary and overtime rules since the Obama administration."
"It's really this simple," said Shuler. "Every worker deserves their fair share of the wealth they help create and every worker deserves to make sure their hard-earned money is secure."
Keep ReadingShow Less
More Than 4 Dozen Unions Demand 'End of Repression' of Columbia Protests
"The right to protest is necessary for every struggle, and the direct attack on this right is an attack on labor as well," said the labor groups. "An injury to one is an injury to all."
Apr 23, 2024
More than four dozen labor unions across numerous industries on Tuesday signed a letter expressing solidarity with students who have been suspended and arrested in recent days for protesting at Columbia University, including members of the on-campus labor group Student Workers of Columbia.
Unionized student workers in SWC-UAW 2710 were among the hundreds of picketers who have been protecting the Gaza Solidarity Encampment, which students set up at Columbia on April 17 to pressure administrators to divest from weapons manufacturers, tech companies, and other entities that benefit from Israel's apartheid policies in the occupied Palestinian territories.
The Ivy League institution, protesters say, will remain complicit in Israel's bombardment and blockade on Gaza, the killing of at least 34,183 Palestinians in the enclave since October, and the intentional starvation of dozens of people, until it entirely divests from Israel.
"As workers, we stand in solidarity with our union siblings in SWC-UAW 2710 who were arrested and face suspension," said the unions, including the Mother Jones Staff Union, Irvine Faculty Association, and Cleveland Jobs With Justice. "We call for their and their classmates' immediate reinstatement and for Columbia to drop all charges against them, both legal and academic. We deplore [Columbia president Minouche Shafik]'s actions and call for Columbia to immediately end the repression of protest."
The protests at Columbia—where more than 100 students were suspended, arrested for trespassing, and in some cases, evicted from their housing—have galvanized college students and faculty members at a growing number of universities in recent days.
Campus groups at the University of Minnesota and the University of Pittsburgh both announced early Tuesday that they were setting up their own encampments in solidarity with Columbia students and victims of the Israel Defense Forces' relentless attacks on Gaza, which the International Court of Justice said in January was "plausibly" a genocide.
After police arrested students at the University of Minnesota Tuesday afternoon and broke up the encampment, thousands of members of the school community rallied to demand that the university divest from all arms manufacturers.
Encampments were also erected Monday at University of California, Berkeley and University of Michigan.
Jessica Christian, a photojournalist for the San Francisco Chronicle, reported that students were stopping to "ask what supplies the campers need as they walk by to class" at Berkeley, where roughly 50 tents were set up on Tuesday.
On Monday night, dozens of students at Yale University and New York University were arrested for protesting, setting up encampments, and "disorderly conduct."
The arrests at Columbia last week have not stopped students and educators from speaking out against the administration. A new encampment was set up last Friday and hundreds of faculty members staged a walkout Monday in support of the students.
In their letter, the unions on Tuesday warned that "the repression and criminalization of activists, students, professors, and academic workers across the country are violations of our elementary rights to free speech and protest."
"The right to protest is necessary for every struggle, and the direct attack on this right is an attack on labor as well," said the unions, "An injury to one is an injury to all—if the Columbia students can be repressed for protesting, Columbia workers and all workers could be too. Workers stand in full solidarity with this student movement."
Keep ReadingShow Less
Most Popular