\"General Taxes\" Please respond to the following: •Review the following scenari
ID: 344256 • Letter: #
Question
"General Taxes" Please respond to the following: •Review the following scenario and then analyze the impact of tax holidays on the budget. Scenario: Several states have declared sales tax holidays for which the state does not collect sales tax on selected items for those day or days. In most instances, the holiday has applied to purchases of clothing and the period has been a week to 10 days in August. The primary reason is to provide a “back-to-school” discount as families get ready for the upcoming year; however, in recent years, some states have proposed or enacted holidays for hurricane survival supplies, gasoline, Energy Star appliances, and guns and ammunition. You are the State Economic Director. Analyze the economic impact of tax holidays of up to 10 days in your state.
Explanation / Answer
I live in the state of Georgia and tax holidays of up to 10 days in my state do not have a definite positive economic impact. Unlike conventional wisdom the 10 day tax holidays do not promote economic growth in any way. Neither do they help in increasing the level of consumer purchases. What it simply does is that it shifts the timing of the purchase. Consumers and buyers defer their purchases to the time when tax holidays are offered by the government. The quantum of purchase and the amount of dollar spending does not increase with tax holidays; it is just that most of the dollar purchases for the year will happen during the period of tax holidays.
As the amount of dollar spending does not increase consumer spending it also does not help in creating additional employment in the long run. Tax holidays are, in fact, regressive in nature and introduce unwarranted government distortions into the economy.
To conclude the economic impact of tax holidays of up to 10 days in my state is certainly a negative one. No additional jobs are created, no incremental consumer spending takes place and no momentum is provided to the economy as a result of the tax holidays.
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