Sales tax holidays scrapped as school shopping begins

Greg Hilburn | The News Star

Show Caption Hide Caption Rep. Paula Davis: 0.4 percent sales tax hits 'sweet spot' of compromise The bill by Rep. Paula Davis, R-Baton Rouge, also has the support of House Speaker Taylor Barras, R-New Iberia.

Louisiana consumers counting on a sales tax break for back-to-school shopping this weekend will have to rely on store-offered discounts to save money.

That's because the new 0.45-cent sales tax bill passed by the Legislature and signed into law by Gov. John Bel Edwards this summer discontinued the state's three sales tax holidays for seven years.

What had become known as Louisiana's "Back-to-School Sales Sales Tax Holiday" would have been Friday and Saturday. Though state sales taxes were exempted on this holiday, local sales taxes were still applied.

In 2017 shoppers saved 5 percent during the Back-to-School Sales Tax Holiday. This year the state sales tax rate is 4.45 percent.

The other two holidays that will be discontinued from the state sales tax exemptions are are the Second Amendment Sales Tax Holiday Sept. 7-9 and the Disaster Preparedness Sales Tax Holiday on the last weekend of May. The local tax break on the Second Amendment Holiday will remain in place.

State Rep. Paula Davis, R-Baton Rouge, who authored Act 1 from the third Special Session of the year, said the sales tax holidays weren't discussed in the debate on her bill "because it was already a dead issue."

Davis was referring to the second Special Session where the House rejected an amendment to add the sales tax holidays into a one-third cent sales tax bill by Rep. Lance Harris, R-Alexandria.

Harris' bill eventually failed, creating the need for a third Special Session. Davis said she basically duplicated the language of Harris' bill other than increasing the amount of a new sales tax from one-third cent to 0.45-percent.

"The body had spoken," she said. "I filed my bill as a duplicate to Lance's because it seemed clear that bill had the best chance of passing."

Louisiana's Department of Revenue estimates the sales tax holidays would have cost the state $5.2 million in taxes this year. On the other hand, it would have saved consumers the same amount.

Tax policy groups like the Tax Foundation in Washington, D.C., argue sales tax holidays are bad policy because they only shift sales forward or postpone them without increasing overall retail sales.

“Sales tax holidays do not promote economic growth or significantly increase consumer purchases,” the Tax Foundation said in a report.

But all three of Louisiana's neighbors have back-to-school holidays in place this year. Mississippi's was last weekend, while Arkansas' is schedule Saturday and Sunday and Texas' is scheduled Aug. 10-12.

"It's sounds great politically, but tax experts say it's not sound policy," Davis said. "I think a better policy would be to focus on how we can lower sales taxes year-round rather than just certain days of the year."

State Rep. Jack McFarland, R-Winnfield, was among those who shepherded Davis' bill through the House.

"I wasn't aware that the sales tax holidays had been removed, but it wouldn't have changed the way I voted," he said.

Davis' bill, which was designed to replace part of a temporary one-cent sales tax that expired June 30 and avoid a budget crisis, will expire on June 30, 2025.

But lawmakers could seek to reinstate the sales tax holidays before then beginning in next year's Regular Session.

"I suspect someone will file a bill to add them back and I'll look at it again," Davis said.

Greg Hilburn covers state politics for the USA TODAY Network of Louisiana. Follow him on Twitter @GregHilburn1.