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The Tax Foundation is the nation’s
leading independent tax policy
research organization. Since 1937,
our research, analysis, and experts
have informed smarter tax policy
at the federal, state, and global
levels. We are a 501(c)(3) nonprofit
organization.
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Editor, Rachel Shuster
Designer, Dan Carvajal
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2022 Sales Tax Holidays:
Bad Policy Any Year, But Especially
in Response to High Inflation
Key Findings
• Seventeen states will hold a sales tax holiday in 2022, down from a peak of 19
in 2010 and unchanged from last year.
• Sales tax holidays do not promote economic growth or significantly increase
consumer purchases; the evidence (including a 2017 study by Federal
Reserve researchers) shows that they simply shift the timing of purchases.
• Sales tax holidays are an inefficient response to inflation that encourage
spending to be concentrated in a limited window at a time when supply chains
are already strained.
• Sales tax holidays create complexities for tax code compliance, efficient labor
allocation, and inventory management. However, free advertising for what is
effectively a 4 to 7 percent discount leads many larger businesses to lobby for
the holidays.
• Most sales tax holidays involve politicians picking products and industries to
favor with exemptions, arbitrarily discriminating among products and across
time, and distorting consumer decisions.
• While sales taxes are somewhat regressive, this does not make sales tax
holidays effective for providing relief to low-income individuals. To give small
tax savings to those with lower incomes, holidays give large savings to higher-
income groups as well.
• Such political gimmicks distract from genuine, permanent tax relief. If a state
must offer a “holiday” from its tax system, it is an implicit recognition that
the tax system is uncompetitive. If policymakers want to sav