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Indiana Retailers Lobby For Tax Holiday

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Photo: Patrick Hoesly (Flickr)

Opponents contend tax holidays just change the timing of purchases, not how much people buy.

Legislators in both parties have suggested exempting clothing or back-to-school items for anywhere from a week to a month, to give consumers a price break and pump up business.

Washington Economics Group Spokesman Horacio Soberon-Ferrer says Florida’s week-long tax holiday increased sales tax collections because people bought non-exempt items while they were in the store. But the Washington-based tax foundation contends tax holidays only change the timing of purchases, not how much people buy.

Senate Tax and Fiscal Policy Chairman Brandt Hershman, R-Wheatfiel, says legislators need to tread carefully before eliminating any taxes.

“We have to balance those opportunities against the overall revenue impact that it could have on the state,” he says. “Because obviously, people want vital services like schools and roads and police funded.”

The foundation notes six other states have experimented with sales-tax holidays, then given up on them. Even Florida suspended the tax holiday for two years before resuming it last year. Ferrer says the reaction from consumers would be way beyond the actual discount.

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