Stuck Inside of Retail With the Tax Holiday Blues Again

Posted on by Dan Grana

Before I depart for a semester in London, I plan on replacing a portion of my seasoned wardrobe. I’ll be shopping in the States because (thanks, in no small part, to monetary distortions on a much larger level) the value of my wealth will roughly halve when the “fasten seatbelt” sign illuminates.

As my fellow bloggers have noted, with differing degrees of enthusiasm, we are in the midst of a tax “holiday.” My consternation about this practice is mostly explainable by the theory-driven gripe I’m about to offer. However, I’m also upset that the holiday has landed on one of the few weekends where I have better things to do than draw funds out of savings.

The tax holiday is a feel-good gimmick. Many people, maybe even some needy parents gearing up for another costly school year, will return home from the store with a few more bucks than they otherwise might have. The state budget won’t really suffer, either. What’s the harm? If you don’t find yourself frequently daydreaming about monetary policy, there really isn’t any; enjoy your shopping spree.

Still with me? Then you’ll agree that the tax holiday tarnishes the price system’s fidelity as an indicator of value. This distortion is based on the fact that, at least for the foreseeable future, state and local revenues draw heavily from sales tax. In fact, I think it’s reasonable to say that a good’s price after tax is more faithful than its pretax price at representing that good’s real cost. By this reasoning, the expenditures of state and local governments are inputs partially included in the price of a good. This makes sense, considering who builds the roads on which inventories and customers travel. When this input is discounted, the resulting price could (and will) motivate consumers to buy more than they otherwise would in an efficient market. Sarah’s example of a hypothetical shopper driving far away to cash in on tax-free shopping is a great example of how price distortions can affect individual behavior in negative ways.

I also feel shorted because of the arbitrary nature of the holiday. In general, I’m enthusiastic about reducing taxes and regulation in hopes of bettering economic freedom. However, this instance of a tax break slightly benefits those who shop during this weekend at a tiny cost to those who make purchases on the other 362 days. In order to retain the tax revenue that would be available without a holiday, Missouri officials will have to marginally increase the sales tax rate. If they choose not to do so, the state will have less revenue than it otherwise would. Although it’s certainly not the case that tax revenue necessarily benefits me or any other voter effectively, it does so to at least some extent. The holiday also unnecessarily benefits those who spend relatively more money during these three days. There’s just no good reason for rewarding people who shop this weekend rather than any other.

So, is the tax holiday highly damaging? Absolutely not. However, any humanitarian advocate for it should research more direct methods to promote their desired outcomes. In the end, we are only billing ourselves to indulge in a weekend of slightly less expensive shopping. I think the only really unfortunate outcome of this event is that we further distance public sentiment from good economic thought by allowing shoppers to get excited about a gimmick.

Where Is the Focus?

Posted on by Cynthia Juedemann

Two superintendents recently asked me to disclose a list of donors to the Show-Me Institute, as well as the amount of their donations. This came after my request for their employment contracts with their respective school districts. I asked how their school districts paid them; they asked who paid for my research.

But there’s a crucial difference. Their districts pay them with taxpayer dollars. The Show-Me Institute pays me with private ones. The two situations just aren’t comparable.

Classifying superintendent compensation as part of public record isn’t arbitrary. Missouri citizens fund superintendents, and they have a right to know where their tax dollars are going.

When denying our request to waive research and copying fees, one superintendent wrote that this research wouldn’t serve the public good, but rather personal agendas.

While I understand asking about compensation can be a touchy subject, superintendents signed up for this. They made themselves public figures the moment they took a job with a public entity. But the knee-jerk protectionist tendency is still there. Even when superintendents comply with my requests and send their contracts, the information sometimes come with comments.

“I understand it is your intent to lobby against public schools with this information,” wrote one superintendent on a cover page sent with his contract. “What a shame, the focus continues to be on anything but the students.”

I am not writing this post because I feel the need to defend or justify my research. I would hardly be working for the education branch of an organization if my intent were to fight against public education. I am a product of public education, from elementary school clear through to the public university I attended. But I do want to address, again, the purpose of what Audrey and I are doing.

Continue reading “Where Is the Focus?”

Horrible, No Good, Very Bad Sales Tax Holidays

Posted on by Sarah Brodsky

This policy is egregious enough to warrant another reference to Judith Viorst.

When I argue with people about tax holidays, I usually say something abstract about “economic distortion” and their eyes glaze over. But now I have a concrete example of the harm that tax holidays do:

This will be the 5th time the Show me state has participated in the holiday although nearly 200 cities and over 50 counties have decided not to participate in the event.

The people in the counties that aren’t participating can still buy school supplies without paying taxes — if they drive far enough. Parents decide whether the extra gas costs will be lower than the retail savings — and, if the answer is yes, they make an extra-long trip. They’re going out of their way and using lots of gas in response to arbitrary rules, not because school supplies are naturally more plentiful in the participating counties. If a legislator gave a speech encouraging his constituents to drive far away to buy something they could easily get close to home, everyone would think he (or she) was crazy. But when you call it a “holiday,” it sounds more legitimate, when in fact it’s just a state mandate to waste gasoline. It’s sort of like an ethanol mandate, except not even the corn growers benefit from this one.

Tax Holidays: Love ‘Em, Hate ‘Em? You Decide!

Posted on by Patrick Eckelkamp

For those in Missouri, it’s that time of year again. The Cardinals are fighting for the playoffs, the Royals are fighting to stay out of last place, the temperature and humidity are becoming too high, and it’s a tax holiday weekend! Yes, this is the weekend where all parents with school aged children will flock to the nearest big box store, desperate to cash in on the no-sales-tax weekend during which they will probably end up spending more money then they intended. But who cares? NO TAXES!

The validity of these types of tax holidays has long been debated on this blog, with both sides offering convincing arguments. Personally, I don’t mind the tax holidays. I don’t like taxes in any form, and any time I can get rid of them, I am happy. I know some people will take a more complicated viewpoint that the tax holiday is just distorting regular consumer behavior, and I agree, but I just don’t mind it happening this weekend. The net effects, one way or another, will probably be so minuscule that there will be no real impact on the economy.

Of course, I would favor lower taxes year-round, but for now, I will take what I can get. This argument has sparked uproar in the office, and I suspect several related blog posts will follow this one. I realize that this sales tax holiday is really nothing more than a gimmick conjured up by legislatures, and I guess they found a sucker.

Lobbying for More Government

Posted on by David Stokes

There is a brief post in Prime Buzz today about the decision by the KC City Council to renew its lobbyist contract. This is an issue that has long bothered me, and I want to direct your attention to the second comment in that Prime Buzz post. I do not believe it is proper for one level of government to hire people to lobby another level of government. That is the job of elected officials and staff, not outside lobbyists. People who represent Saint Louis or Kansas City in Jefferson City or Washington, D.C., are supposed to look out for their interests at those levels (and by “interests,” I don’t mean bringing home the pork spending).

People who represent these areas at the county seat or in city hall are supposed to follow state or national issues, and bring items to the attention of other officials if changes need to be made. Spending additional taxpayer dollars to lobby other levels of government for more money is offensive and should be stopped. In a small way, it contributes to the neverending growth of government and its constant expansion into every realm of our lives.

For the Ladies (All 105 of Them)

Posted on by Audrey Spalding

Paul, Bill, David, Steve, Michael. It’s not an exhaustive list, but those are some of the most common superintendent names. “Mary” shows up much less often.

In fact, nearly 79 percent* of Missouri superintendents are male.

Though it’s getting better, it’s a sad fact that men tend to earn higher salaries than equally qualified women. It’s a sad fact that there are more men in leadership positions than women.

But in school districts, where superintendents tend to come from the ranks of teachers and administrators, this is shocking. It’s not just that a large majority of Missouri superintendents are male. It’s that a large majority of superintendents are male while a large majority of school district employees are female. According to the National Center of Education Information, 82 percent of all teachers in the United States were female in 2005.

Continue reading “For the Ladies (All 105 of Them)”

Corn Contention

Posted on by Dan Grana

Today, the Post-Dispatch editors chastised the leading Republican gubernatorial candidates for turning the Missouri ethanol mandate into a major campaign issue. The editors may well be correct that “the mandate makes very little difference in the bank accounts of drivers, grocery shoppers, or even farmers.” However, contention over the mandate might provide a worthy outlet for opinions about larger issues, such as the government’s involvement in ethanol production and the appropriateness of direct intervention into other markets.

As a practical matter, the future of the current ethanol mandate will not have a large effect on the commodity prices Missourians face. Our study, which was a narrowly focused rebuttal of another study, estimates a considerable, but not overwhelming, price tag of $29 per Missouri driver per year. The P-D suggests that “for drivers, there’s probably only a tiny savings.” Regardless of whether the mandate is a net positive or net negative, we both agree that the effect is relatively small. After all, the legislation only touches statewide consumption of globally traded commodities in the event that their associated market prices are lower than those of conventional gas.

Even so, the current discussion is anything but frivolous. The ethanol savings figures given by the Missouri Corn Merchandising Council are patently false. Further, the use of coercive intervention into a fully functional market raises legitimate doubts. The Republican candidates obliviously feel that they can effectively offer different shades of conservatism through a real — although perhaps not earth shattering — debate. Whether their attempts to differentiate themselves will pay off remains to be seen, but we can’t blame them for trying.

Turning Your Money Against You

Posted on by Dave Roland

As a link from this website has previously shown, Missouri Citizens for Property Rights gathered more than 400,000 signatures in its effort to give Missourians the opportunity to end eminent domain abuse this November by passing two proposed amendments.

Concerned that the amendments’ adoption would cut off their ability to give away their citizens’ homes and businesses to commercial developers, some cities are now setting aside taxpayer dollars to try to prevent the vote from happening. This is every bit as outrageous as school districts gambling millions of dollars in taxpayer funds in an effort to get billions of dollars in taxpayer funds. You should consider doing a little research to find out whether your local officials are using your money against you in a similar way.

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