Did you venture out to purchase school supplies for your aspiring young scholar during our state’s tax-free weekend? Or, perhaps your child’s school days have long passed and you simply wanted to acquire a new computer without incurring a sales tax. Either way, North Carolina recently held its annual sales tax holiday, during which the state throws caution to the wind for a weekend and exempts clothing, computers, sports equipment and other selective “back to school” items from our state and local sales tax. The tax ranges from 6.75 percent to 7.25 percent, depending on the county in which you reside.
The media always seem to become excited when North Carolina’s weekend without a sales tax comes around. A plethora of news reports encourage parents and consumers in general to take advantage of the wondrous event. And, don’t get me wrong; it is a good event. I may have even bumped into you while hunting down supplies for my final semester of college.
The recent tax-free weekend got me thinking, though. What underlying economic reality emerged during the wonderful weekend? People became rather excited about the notion of purchasing goods in the marketplace while not being coerced by the government to pay a pesky sales tax. That should be a cause for some excitement! It seems that, in today’s era of big government, every activity (even some inactivity, sadly) is liable to be taxed. While most of us realize that the government’s taxing power is a legitimate function, that legitimate function has been used and abused, taking away too much of our hard-earned money with increased frequency and intensity. With that in mind, there should be no confusion as to why people become excited about a tax-free weekend.
But, perhaps we can take away an even larger, more significant truth from our state’s tax holiday. What does the event imply about the relationship between consumer participation in the economy and taxes? It seems to suggest that people are incentivized to enter the marketplace and spend their money when the tax burden (even a seemingly small sales tax burden) is removed. Imagine that! People will typically spend more money while engaging in economic activity when they know they will not be taxed. Politicians everywhere should take note.
People really don’t like taxes. And when some of those taxes are nullified, even for a weekend, consumers respond with greater economic participation. If significant tax relief could be made permanent, think of the potential economic growth and prosperity that could be created in perpetuity!
During a time when our great nation and state remain mired in economic malaise, perhaps our elected officials should consider the reaction of consumers during a tax-free weekend to find ways to resurrect our economy. Burdensome taxes have the tendency to put a damper on economic activity, whereas reducing or eliminating taxes can do just the opposite.
Do you remember the little bit of joy you experienced over the tax holiday when, after checking out at the store, you glanced at your receipt and saw there was no sales tax? It was a good feeling, wasn’t it? I think the joy of reduced taxation should be experienced more than one weekend a year. Let the implications of the tax holiday teach us a valuable lesson. And when you’re out shopping during the other 51 weekends of the year and you go to glance at your receipt after departing a department store and you find that pesky sales tax, think about the impact taxes have on economic growth and prosperity.
Scott Blakeman, an intern with the Civitas Institute wrote this article.