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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
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Sales Tax Holidays: Politically
Expedient but Poor Tax Policy, 2020
• Sixteen states will hold a sales tax holiday in 2020, down from a peak of 19 in
2010 but unchanged from last year. Given the coronavirus crisis, Tennessee
established a second sales tax holiday, targeting restaurants.
• 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 not an effective solution to the current economic crisis,
as the drop in consumption is caused by a public health crisis, not less desire
• 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
• 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 recog