Critics say sales tax holiday makes code too complicated

COLUMBIA --- For two days after Thanksgiving, shoppers in South Carolina will be able to buy guns tax-free, but some say it's a political gimmick that only complicates the tax code.


The bill that created this sales-tax holiday, which was vetoed by the governor but overridden by lawmakers, also created a monthlong exemption for next October for energy-efficient dishwashers, ceiling fans and other home products.

The tax holidays will happen every year as long as state revenue forecasts are considered healthy. For South Carolina and other states, that prospect is far from certain.

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.

Bryan Cox, a spokesman for the South Carolina Policy Council, said the holidays distract from meaningful tax reform.

Besides, "If we all agree lower taxes promote economic growth, let's support lower taxes all year round," he said.

Their criticism is shared by an unlikely lawmaker: State Rep. Michael Pitts, R-Laurens, who wrote the House version of the tax-free gun bill.

"I agree with that 100 percent," the retired police officer said. "We should get rid of all the exemptions, all of them, and go back to a straight across-the-board tax."

As for whether his gun-tax exemption was a political maneuver, Mr. Pitts agrees with that, too.

"Yes, this was a political statement," he said. "It was politically designed to bring recognition to the importance of the Second Amendment."

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