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Cash-poor Illinois rejects back-to-school tax holiday

Updated: September 8, 2011 12:33AM

Unlike last year, there will be no “back-to-school” sales tax holiday in Illinois this year.

State Sen. Toi Hutchinson (D-Chicago), who was chief sponsor of the state’s holiday last year, says Illinois “just cannot afford it this year.”

New York was the first state to enact a back-to-school sales tax holiday in 1997.

Other states soon followed, sometimes to keep residents from crossing state lines to shop in states with tax holidays.

National Retail Federation CEO Matthew Shay says the holidays “bring people into stores like few other promotions.”

Studies have shown, however, that the holidays simply shift the timing of purchases consumers already planned.

The Tax Foundation and the Institute on Taxation and Economic Policy say the holidays mostly benefit wealthy families. Low- and middle-income families don’t have the discretionary income or time to shop only on the tax holidays, the groups contend.

The Tax Foundation says states should simply cut sales taxes if they want to give consumers a break. Policy think tank ITEP says states should instead offer sales tax credits to consumers who need them the most. To get the credits, eligible consumers would have to ask for them on their tax returns.

A sales tax credit could be designed to target the low- and middle-income families lawmakers want to help, says ITEP’s Matthew Gardner.

“The striking thing about sales tax holiday laws,” Gardner says, “is that policy people all over the ideological spectrum agree they’re a dumb idea.”

Gannett News Service

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