Sales tax holidays result in more revenue, not less
State revenues just declined by another $136.9 million in January, a drop-off of 8.7 percent from last year. Through the first seven months of this fiscal year, Georgia's deep economic recession has caused a shortfall of nearly $1.3 billion.
As secretary of the Senate Appropriations Committee, I can attest that legislative budget writers are scrutinizing not only every line item on the expenditure side of the ledger as we deal with the state's fiscal crisis, we are also seeking ways to maximize the income side. Severe budget cuts are taking their toll on state services and affecting Georgians' lives in critical areas like education, health care and public safety.
Some lawmakers have questioned whether the twice- a-year state sales tax holidays on certain goods are costing the treasury too much money and need to be discontinued or at least suspended until the economy turns around. The answer to that question is no.
Having introduced the original version of Georgia's sales tax holiday legislation along with former Rep. Ron Borders in 1999, I welcome the scrutiny. We do need to take a close look at every program that has an impact on the state's fiscal balance sheet, but the fact is our sales tax holidays have been a major success for Georgia consumers, retail businesses and, ultimately, the taxpayers.
The General Assembly has voted overwhelmingly each and every year to renew the tax-free period for back-to-school items in the summer and a few years ago added a separate tax holiday weekend for energy- efficient appliances. It has always been an easy case to make because of the sales tax holidays' popularity with shoppers and retailers alike.
Now, there is statistical data showing that sales tax holidays -- rather than "costing" revenue -- actually enhance a state's fiscal health. The Georgia Retail Association (GRA), using a study conducted by the Washington Economics Group as a guide, reports that Georgia's back-to-school sales tax holiday has a positive economic impact, causing an 8 percent increase in gross sales.
While the study looked specifically at Florida's experience with sales tax holidays, GRA extrapolated the following conclusions for our state:
~ The back-to-school sales tax holiday is responsible for generating 6,174 full-time equivalent jobs, 71 percent in retail.
~ An additional $177 million in wages were paid during Georgia's back-to-school sales tax holiday.
~ The increased economic activity caused by the tax relief on back-to-school products resulted in a net increase of $33 million in taxes collected.
"There is an increase in economic activity due to the stimulating nature of the back-to-school sales tax holiday," GRA President John Heavener reports. "The result is an additional period of spending on goods and services that continues as a halo effect for the following months. Sales of items that remain taxable during the holiday are directly and significantly increased by a higher number of people shopping, and indirectly increased by the additional $177 million in labor income, a large portion of which is, in turn, spent and thus generating additional sales taxes."
One out of every five jobs in Georgia is in the retail sector. The back-to-school and energy-efficient sales tax holiday periods give our retailers a much-needed booster shot in the arm, twice a year.
This sales tax holiday is especially needed in border cities like Brunswick, Thomasville, Columbus, Dalton, Augusta, Savannah and hundreds of communities in between to keep Georgians shopping in Georgia and attracting more business from our neighboring states.
Many of the tax breaks that have been written into Georgia law over the years have been geared toward major corporations in the name of job creation. The benefits of our sales tax holiday periods are targeted directly at the working families in our state who need a break, especially during economic conditions that make it so difficult to make ends meet.
Georgia's sales tax holidays are a proven success. We should continue to support legislation that gives tax relief to those who need it most, boosts consumer spending to help the economy and ultimately generates additional revenue to help balance the state budget.