Back-to-school sales tax holiday unlikely in Illinois

SPRINGFIELD (The Center Square) — Illinois is unlikely to join the list of states that offer a “back-to-school” sales tax holiday.

Sales tax holidays are periods when specific goods are exempted from state, and sometimes local, sales taxes. Many states schedule the events for August when “back-to-school” shopping largely takes place.

Illinois held a one-time sales tax holiday back in 2010, but Rob Karr, president of the Illinois Retail Merchants Association, said it didn’t provide the boost some expected.

“It was a mixed bag,” Karr said. “There was not much receptivity to do it. And it has since kind of faded away. I don’t think anyone is interested in doing it again.”

Karr said the views of IRMA’s membership have changed, with most “neutral to opposed” to the return of a holiday event in the state.

“Even back then, there was some hesitation about it from many members because of the complications it takes to undergo such an effort,” Karr said. “You have to change systems, there are scheduling issues, there are inventory issues. There’s a lot of things that go into making a sales tax holiday happen.”

Supporters say the sales tax holidays can help retailers and spur economic activity.

Janelle Cammenga is a state policy analyst with the Tax Foundation, an independent tax policy nonprofit. She says the data indicates that’s not true.

“People don’t actually buy more with sales tax holidays, they just tend to shift when they shop,” Cammenga said. “A lot of states think people will end up paying more [tax] for items not subject to the holiday. No, they just shift when they buy everything, so there’s not a net increase in most cases.”

Cammenga said states that hold the sales tax holiday events might have bigger policy problems.

“If you need to give people a holiday from sales taxes to keep them shopping in-state, chances are you’re not that competitive to begin with,” Cammenga said.

“Better to just lower your rates year-round, and give benefits to everyone, rather than just give benefits to a few people who buy an arbitrary assortment of products.”

Illinois’ existing state sales tax rate is 6.25-percent, thirteenth highest in the country.

If lawmakers wanted to bring back a sales tax holiday, they’d need to pass legislation to put it in place.

“If you’re looking at doing a sales tax holiday, there’s an argument that you’re tax system needs to be changed,” Karr said. “That you’re doing it because you have a messed up tax system, so you ought to look at changing the system as opposed to what some might call gimmicks.”

Then why do states continue to operate the sales tax holidays?

“Because it sounds really good,” Cammenga said. “People like the idea of getting their sales tax off for a certain number of days each year. It sounds good, even if it doesn’t make a lasting difference.”

Sixteen states, including Iowa and Missouri, will hold some version of a sales tax holiday this year. Wisconsin did not continue a one-time holiday the state held in 2018.

Reporting by Scot Bertram