At the signing of the 2021-22 tax cut package, state leaders praised the addition of a new seven-day sales tax holiday for select admissions and items related to recreational activities, touting the new “Freedom Week” sales tax holiday as an opportunity for Floridians to celebrate their freedom from pandemic-induced lockdowns.
As a matter of public policy, there is no denying that sales tax holidays are popular with lawmakers. Since the passage of Florida’s first ever holiday in 1998, lawmakers have enacted more than two dozen sales tax exemption periods. However, does a sales tax holiday like “Freedom Week” help Floridians celebrate their freedom?
While the Sunshine State has a reputation as being “low tax,” the truth is that Florida has one of the most upside-down tax systems in the nation due to its overdependence on sales taxes. In our state, a worker making minimum wage spends a greater share of their hard-earned cash paying state and local sales taxes than a millionaire. So, many Floridians who are struggling to make ends meet could use relief from our upside-down tax code. However, research shows that sales tax holidays are not the answer.
Sales tax holidays are not free, nor do they lead to savings. Policymakers are required by law to keep a balanced state budget, which means that they have to make up any forgone revenue either through spending cuts or tax increases. The 2021-22 tax cut package totals $135 million. That’s $135 million that the state can’t invest in other programs, like fixing Florida’s unemployment insurance system, or fully funding affordable housing. Eventually, Floridians pay for sales tax holidays even though four in five residents do not use them on a regular basis. Finally, “Freedom Week,” just like the other tax-free periods, is just that, a week. Floridians with low- and moderate-income have to cope with our state’s upside-down tax code for the remainder of the year.
What is done is done, and, since hardworking Floridians will end up paying for “Freedom Week” either way, they might as well try to use it this upcoming July 1-7. However, next year, lawmakers should skip tax holidays altogether. The money spent on these holidays could be better used to reform our state’s upside-down tax system. Investing in some form of Working Floridians Tax Rebate (based on the federal Earned Income Tax Credit) to compensate Floridians for their hard work and for paying taxes would give families an income boost and stimulate the local economy. The rebate is also popular among voters: a recent poll commissioned by Florida Policy Institute and conducted by Data for Progress this past May and June shows that close to 70 percent of Floridians support it.
If we want Floridians to have the freedom to enjoy economic mobility, we ought to start by skipping sales tax holidays and building a fairer tax system to establish broadly shared prosperity.
Esteban Leonardo Santis is a policy analyst at the Florida Policy Institute.