Del. Candi Mundon King, D-Prince William County, last week tweeted out her thoughts about Gov. Glenn Youngkin. They weren’t good.
No surprise there — she’s a Democrat, he’s a Republican and this is an election year — but one of the issues King cited was curious. Beside a picture of Youngkin were the words “Tax free school supply holiday cancelled.”
That’s true, but Youngkin wasn’t the one canceling it. Truth be told, nobody canceled it. As Cardinal’s Markus Schmidt reported recently, legislators — from both parties — simply forgot to renew it.
Oops.
That kind of oversight doesn’t surprise me; there are a lot of moving parts in a state budget and I’m sure this isn’t the first time something has been forgotten. Still, I’m surprised that the lapse of a popular tax-free weekend hasn’t brought forth bipartisan calls for the easy solution: convene a special session to rush through emergency legislation to restore it.
Some legislators have called for this but they’re Democrats — King and Del. Danica Roem, D-Manassas — so their views probably don’t hold much sway in the office of a Republican governor.
For both parties, the absence of the tax holiday seems a gift, so I’m curious why more candidates aren’t taking advantage of this unexpected opportunity. For Democrats, who routinely get tagged as big taxers-and-spenders, here’s a chance to get on the side of a popular tax cut. For Republicans, who rarely seem to pass up a chance to push for tax cuts, support for this would seem to be reflexive. Instead, we’ve heard some Republicans suggest that the tax holiday was really just a gimmick and that we should be more focused on broader, year-round tax cuts.
That may be true but when has a party ever passed up an opportunity for easy sound bites? This coming weekend is when the tax holiday traditionally was held; if the legislature had been called into session and had reinstated it, every legislator would be a hero, at least for a while — although maybe that’s the political calculation. If you’re the governor, who’s trying to hold onto the Republican majority in the House of Delegates and turn the Republican minority in the Senate into a majority, you don’t want every legislator to be a hero — just the Republican ones.
Along those same lines, I’m surprised the governor hasn’t called for a special session to resolve the impasse over amendments to the two-year state budget. The main hangup has been the tax cuts that Republicans want, and that Democrats don’t. That may ultimately be something voters this fall will need to resolve but in the meantime, the lack of a budget deal means that no flood relief is flowing to Buchanan County and Tazewell County, which suffered a devastating flood more than a year ago. I suppose it’s a good thing I’m a writer and not a political strategist because if I were, I’d have my candidates trekking down to Pilgrim’s Knob and Whitewood to show their concern — and blaming the other party for flood victims there having to wait so long for aid. Instead, I’ll just call your attention to the column I wrote several weeks ago about how people there are being held hostage to political machinations in Richmond. Just in case you need a reminder of how devastating that flood was, here’s a photo from last year:
Meanwhile, let’s take a closer look at the tax holiday that has gone away.
The concept was exceedingly popular in 2006, when it was first enacted. That year there were no fewer than nine separate bills introduced in the House of Delegates to create such a tax holiday for school supplies — six from Republicans, three from Democrats. All those bills were eventually rolled into one sponsored by Del. Harry Parrish, R-Manassas and chairman of the House Finance Committee. Among the other bills were ones sponsored by Republican Ben Cline (now the congressman from the 6th District), Democrat Onzlee Ware (now a circuit court judge in Roanoke) and Democrat Ward Armstrong (then the House minority leader, now out of the legislature but still practicing law in Martinsville). On the Senate side, there was a single patron: Ryan McDougal, R-Hanover County.
The tax holiday was one of Parrish’s last acts in office; he died that March at age 84. The Virginia Tech graduate had been a pilot during World War — flying C-47s to carry ammunition and other supplies from India into China “over the hump” of the Himalayas — and later flew during the wars in Korea and Vietnam, as well. In Richmond, he was remembered as “a steady problem-solver who lorded over his committee in a fair, bipartisan manner,” as The Washington Post put it in his obituary. “When Parrish became chairman, he went out and bought each member what has become the committee’s traditional symbol in the halls of the Capitol: deep green blazers with the seal of Virginia embroidered on the pocket.”
The legislature was less partisan then, although we didn’t realize it at the time. The measure passed both houses unanimously, although there were some minor disagreements when it came time to iron out differences between the House and Senate versions. Here’s perhaps the key piece of information: Of those 10 original sponsors, only two — McDougal and John Cosgrove, then a Republican delegate from Chesapeake but now a senator — are still in the legislature. I know it’s easy to blame the legislature for forgetting to renew the holiday but I suppose I’m more forgiving, knowing how much there is to keep track of in Richmond. It’s not as if there were hordes of lobbyists or journalists standing up to say, “Hey, you forgot something!” (Actually, there aren’t hordes of journalists in Richmond anymore, the result of the general shrinkage of news organizations. Cardinal is the only news organization west of Richmond with a full-time reporter in the state Capitol year-round. You can help support us by making a donation.)
When Virginia adopted that tax holiday in 2006, it was getting on a bandwagon that had already been rolling for a decade through other states. The idea of a sales tax holiday began in 1996 in the state that the generally right-of-center Tax Foundation says is the highest-tax state in the nation: New York. “Bowing to pressure from retailers who argued that they were losing business to Connecticut, Massachusetts, New Jersey and Pennsylvania where clothing isn’t taxed, the Legislature instituted the first tax-free week in January 1997,” according to a history by the National Conference of State Legislatures. “All clothing and footwear priced under $500 was exempt from the state sales tax. Local governments were given the choice of opting in or not. Most counties and cities did suspend local taxes during the holidays. In New York City savings equaled 8.25 percent.”
In 1998, Florida became the second state to institute a sales tax holiday, with the Sunshine State specifically targeting back-to-school supplies. In 1999, Texas became the third state and in the years that followed, lots of other states followed — both what we think of as traditionally “red” states and traditionally “blue” ones.
Today the Federation of Tax Administrators counts 18 states with sales tax holidays of some sort. The details differ from state to state but 15 of them are in late July or August, with holidays on taxes for school supplies or clothing or both. Florida now has eight different tax holidays, for things ranging from diapers to hurricane-hardened doors and windows to work gloves, toolboxes and flashlights. Mississippi has an annual three-day holiday on sales taxes on firearms, ammunition and hunting supplies, something I’m surprised other states with large rural populations haven’t replicated. Louisiana used to have a similar sales tax holiday — it was dubbed the “Second Amendment Holiday” — but in 2018 the state canceled all its sales tax holidays to offset a budget shortfall. Up until 2015, Virginia had three separate tax holidays — in May for hurricane preparedness supplies, in August for school supplies, in October for energy efficiency products. Starting in 2015, they were combined into a single August holiday, which has now gone away.
Tax holidays are certainly popular — who among us doesn’t like a deal? — but do they work? They certainly save consumers some money and therefore deprive the state of some revenue. The former is a good thing for everyone, the latter is a good thing if you’re a fiscal conservative. However, a study by the Federal Reserve in 2017 concluded that tax holidays don’t really benefit businesses. You’d think that if sales taxes were waived, people would spend more, but the Federal Reserve found that overall consumer spending didn’t increase, it just shifted from one weekend to another.
That’s why the Tax Foundation takes a dim view of tax holidays. “Sales tax holidays create complexities for tax code compliance, efficient labor allocation, and inventory management,” the foundation says, and it’s just getting warmed up. “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.”
But wait, there’s more: “While sales taxes are somewhat regressive, this does not make sales tax holidays effective for providing relief to low-income individuals,” the Tax Foundation says. “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 recognition that the tax system is uncompetitive. If policymakers want to save money for consumers, they should cut the sales tax rate year-round.”
That’s likely why Virginia Republicans now seem cool to reinstating the holiday — even though they were the main proponents of it 17 years ago.