As school approaches, tax holidays loom

As summer vacations wind down, families across the nation are preparing for another school year, and that means back-to-school shopping. This year, 14 states plan to provide consumers a temporary exemption from state sales taxes in an effort to lessen the burden of back-to-school shopping on low-income families. Of the 14 states, 8 are Southern states (AL, GA, FL, LA, NC, SC, TN, VA).

While the sales tax holiday is appealing to consumers, the exemption is just one of dozens afforded to consumers every year. Some exemptions are minor, but when added up, tax exemptions can costs states billions of dollars a year. U.S. Census Bureau calculations estimate total losses from 2004-2007 sales tax holidays at as low as $2.6 million in Virginia to as high as $31.2 million in Florida.

From Doing Better: Progressive Tax Reform for the American South-

While the sales tax holiday does not harm the adequacy of adequacy of adequacy funds significantly, it also does not achieve any significant tax policy benefits either. In fact, some tax experts refer to the sales tax holiday as a gimmick. David Brunori of George Washington University notes it is laudable legislators would want to give low- and moderate-income families assistance with sales taxes since it is the most regressive tax and takes a larger portion of income from poor residents than from wealthy residents. But he says the sales tax holiday is a gimmick because it does not achieve those goals of taking the tax more just and fairer in any significant way.

For more of what your state can do to broaden its tax base, see Idea 1 from Doing Better (available online).

Drought is hurting farms across Southeast

The New York Times on Wednesday published a gripping story about how a regional drought is sapping strength from Southern farms.

Most of northern Alabama, along with parts of Mississippi and Georgia, is rated D4, the center’s highest possible level of drought intensity, signifying an exceptional drought.

Scientists call it a cruel freak of nature, one that is causing misery to farmers at a critical period in the growing cycle and has already ruined a “startling” proportion of Alabama’s agricultural output, said Douglas Le Comte, a senior meteorologist at the National Oceanic and Atmospheric Administration. Some 88 percent of the state’s corn crop is classified by the government as poor to very poor, along with 85 percent of its soybeans and 74 percent of its cotton.