Sen. Walter Michel, R-Ridgeland, argued on the Senate floor recently “the least” the Mississippi Legislature could do for public school teachers is to enact a sales tax holiday on school supplies.
That would save the teachers – many of whom are having to purchase their own supplies because of a lack of state funding – from having to pay the 7 percent sales tax that is levied on most retail if they shopped on the designated day.
Sen. Hob Bryan, D-Amory, shot back that it was the least, the very least that could be done for Mississippi teachers. He reasoned more state funding for education, perhaps a significant pay raise, would be of more service to school teachers.
And Bryan went on to add if the state had not given multiple tax cuts in recent years, there would be more money to reward teachers.
During the past term, legislators passed about 50 tax breaks that reduced state general fund collections by more than $300 million. And in 2016, the first year of the current term, a tax break totaling more than $400 million over a 10-year period was passed – the largest tax cut in state history.
Proponents of the tax cuts, Gov. Phil Bryant, Lt. Gov. Tate Reeves and Speaker Philip Gunn, would argue the tax cuts over a period of time will spur economic growth. But it seems clear that in recent years they have contributed to the fact state revenue collections have been sluggish even though for the current fiscal year they appear to be on the uptick.
But it is important to consider tax collections still are not great based on historical standards.
The sales tax holidays – a designated time period when certain retail items are exempt from the 7 percent sales tax – are popular with both Republicans and Democrats. The sales tax holiday on back-to-school clothes was initiated by a Democrat controlled House in 2009 and then signed off on by the Republican controlled Senate.
The tax cuts passed after Republicans gained control of both chambers in 2012 and included a sales tax holiday for hunting supplies – known as a 2nd Amendment sales tax holiday.
The 2nd Amendment sales tax holiday eliminates the 7 percent sales tax on the purchase of guns, ammo and other hunting supplies. It does not limit the amount that can be exempt from the 7 percent sales tax.
The sales tax holiday for school clothing limits the sales tax exemption to items of $100 or less.
In other words, there is no limit on the price of a high-powered rifle that can be exempt from the sales tax during the holiday, but there is a limit on buying a fancy pair of blue jeans. And the exemption for the purchase of hunting supplies runs during a three-day period in September, compared to a two-day period for the purchase of back-to-school clothing in July.
Adding the school supplies to the holiday along with clothing seems reasonable.
Interestingly, though, the sales tax holidays seem to contradict the stated goals in terms of tax policy of the legislative leaders. In 2016 Nicole Kaeding, an economist with the Washington, D.C.-based Tax Foundation, met with the legislative leaders. She praised the tax breaks that the state had given to corporations and on personal income.
She advocated the state continue to move toward relying on the sales tax or use tax for revenue to fund state government instead of taxes on personal income and on businesses. It should be pointed out that some tax policy experts view it as regressive or unfair to poor people to levy taxes on the purchase of retail items. But the Tax Foundation views such taxes as the most efficient in generating state revenue.
But Kaeding discounted sales tax holidays as useless and counterproductive to good tax policy.
She said poor people who have limited funds cannot necessarily plan their purchases around sales tax holidays. Wealthier people can and perhaps do, but “it (sales tax holiday) does not encourage anyone to shop more,” she told the legislative leaders.
Incidentally, while the Legislature has enacted sales tax holidays and might enact another on school supplies, the state continues to have the largest state-imposed sales tax on groceries.