Sales tax holidays are a poorly targeted form of tax relief, reduce state revenue that could be invested in other areas, are often exploited by retailers who raise prices, and can be difficult to administer, according to research by the Institute for Taxation and Economic Policy (ITEP), a non-partisan tax and budget policy think tank in Washington, D.C.
Wealthier residents benefit the most from sales tax cuts and holidays as they have the most disposable income and can easily shift the timing of their purchases to take advantage of the holiday. Similarly, those who purchase more expensive items — like laptops and TVs — will benefit more from the tax holiday than those who cannot afford higher-priced goods.
When New Jersey lawmakers cut the sales tax in 2016 from 7 percent to 6.625 percent, the state’s lowest income residents saved roughly $32 a year, while the top one percent of earners saved more than $720 a year.
Despite Democrats in the Assembly Budget Committee on Monday moving legislation without publicly available text, they voted down Republican amendments to two bills because at least one member objected to a so-called lack of transparency. As per protocol, Republicans distributed amendments to the school supplies sales tax holiday and child tax credit bills to all panel members in advance of the hearing.
“Ten days simply isn’t enough time for a sales tax holiday to reach every person who could use it. We also may not be able to restock the shelves during that very short time period. The savings from this holiday are so little that it doesn’t actually really reflect inflation and the impact that it’s having on families. If you really want to save people money, we should exempt these items from the sales tax permanently,” Assemblywoman Nancy Munoz (R-Union) said of her amendment to the 10-day back-to-school sales tax holiday bill (A1522). The amendment would have permanently exempted the school supplies listed in the bill from the state’s 6.625% sales tax.
Assemblywoman Carol Murphy (D-Burlington) criticized Munoz for not giving advance notice of her intention to amend the bill.
“I would love to have seen the amendments as presented by my colleagues across the aisle presented to the sponsor. I think that would have had a great opportunity for us to have advance notice of the amendments especially since I do not see my colleagues on the bills that they are presenting amendments for. So with that, I vote yes to table,” Murphy said.
Republican Budget Officer Hal Wirths noted the Democrats’ hypocrisy before casting his vote in favor of the bill giving residents a small break on the state’s sales tax.
“My colleagues on the other side of the aisle haven’t seen the amendments and we voted on bills today and we haven’t even seen the bills,” Wirths (R-Sussex) said. “To save taxpayers money, I think it’s a pretty safe bet to take the vote. If we are going to call out the bills, let’s call them all out.” Assemblywoman Aura Dunn (R-Bergen) also moved an amendment to provide more families relief under the child tax credit program (A3852).
“Tax cuts significantly help people especially in this great time of need,” Dunn said. “Low-income and middle-class families need all the relief they can get, and the proposed substitute provides greater relief than the bill on the agenda today.” The Republican amendment would provide a per-child tax credit to any New Jersey family earning up to 250% of the federal poverty level, while the Democrat program targets families earning less than $30,000 annually with smaller credits going to families earning up to $80,000. It was also tabled along party lines.