Back-to-school tax holiday heads to Ohio governor

Published 11:21 am Monday, December 15, 2014

COLUMBUS (AP) — Ohio back-to-school shoppers would get a three-day reprieve from Ohio’s sales tax under a bill headed to Gov. John Kasich’s desk.

The measure cleared the Republican-controlled Ohio legislature last week.

It exempts back-to-school clothing, school supplies and instructional materials from state sales tax for three days in August 2015, creating the holiday as a one-year pilot program.

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Backers estimate the tax holiday would save Ohio shoppers some $78 million. Opponents say sales tax holidays are political and represent bad tax policy.

A separate bill was introduced in March by Democratic state Sen. Edna Brown. It proposes exempting purchases of Energy Star qualified products from sales tax during the first weekend in April. With less than a week to go in the session, its prognosis is dim.

During sponsor testimony this month, Brown said her bill would “encourage increased economic activity, provide consumers with short and long term savings, and reduce pollution and energy consumption.” Energy Star qualified products are considered energy efficient.

The back-to-school tax bill, sponsored by state Sen. Kevin Bacon, a Columbus Republican, first cleared the Ohio Senate in February. Last week, the Ohio House passed an amended bill and the Senate agreed to its changes.

The National Retail Federation estimates that the average U.S. family with children in grades kindergarten through 12 was expected to spend $688.82 on back-to-school purchases in 2012. A July 2013 report by the University of Cincinnati’s Economics Center found that if Ohio waived its 5.5 percent sales tax on these items, and all the spending took place during the sales-tax holiday, the average household would save $38.

“Sales tax holidays have been used in 18 states around the country,” said Gordon Gough, president and CEO of the Ohio Council of Retail Merchants. “It’s real tax relief that has helped taxpayers and consumers around the United States.”

The center’s study also found that retail sales volume would increase by close to 5 percent during the month of a 3-day sales tax holiday.

At the same time, its analysis suggested Ohio wouldn’t see its sales tax revenue drop by a statistically significant amount during the month of the holiday. That’s because consumers who are out taking advantage of the tax break tend to buy more items. Legislative analysts differ, estimating that the state’s general revenue fund would lose $36 million as a result of the holiday.

The liberal Cleveland-based think tank Policy Matters Ohio lobbied lawmakers to substitute a sales-tax credit for the sales-tax holiday. Research Director Zach Schiller said the sales tax is regressive, falling more heavily on lower- and middle-income taxpayers, yet it would be wealthier taxpayers who would benefit from the sales-tax holiday because they’re able to shift their buying patterns most easily.

A sales-tax credit, in place in five states, is a set amount for each member of a family to offset some of the cost of a sales or similar tax.