December 27, 2001 | Commentary on Taxes
It may have taken a war and a recession to do it, but quite a
few liberal politicians are jumping on the "tax-holiday" bandwagon
We're hearing proposals for "sales-tax holidays" and
"payroll-tax holidays." Giving your hard-earned dollars a temporary
reprieve from government's grasp is suddenly in.
Local officials in Washington, for example, recently instituted
a 10-day "sales-tax holiday" to help consumers stretch their
paychecks -- and perhaps motivate them to indulge in some early
Christmas shopping. By waiving the 5.75 percent sales tax on
clothing, footwear and accessories costing $100 or less, officials
said they hoped to "provide our economy a much-needed boost."
New York City officials are pushing for a similar 10-day
sales-tax break for all items, regardless of cost. And some federal
lawmakers want to go them one better -- they're proposing a
national sales-tax holiday that would take place in early 2002,
perhaps in time for the traditional January "White" sales.
It doesn't stop at the sales tax. Sen. Jean Carnahan, D-Mo.,
thinks Americans should enjoy a one-month break from the "payroll
tax," the portion of our paychecks that goes to Social Security.
Completely halting the tax, she says, would be good for American
business. "It will help our small businesses, the true engine of
the economy," she adds.
These holidays are garnering support from politicians on both
sides of the aisle, and for an obvious reason: Letting people keep
their own money to spend (or save) as they please is a good
Which begs the question: If tax holidays provide such a shot in
the economic arm, why not make every day a tax holiday?
No, I'm not talking about repealing every tax. I'm talking about
making deep, meaningful cuts -- the kind of cuts some of our
liberal holiday-boosters fume about.
Conservatives have long argued that cutting taxes is a sure-fire
way to help a struggling economy. And history is full of
You don't have to go back very far. In the early 1960s, for
example, President Kennedy rebuffed the liberal wing of his party
and instituted sweeping tax reductions, which triggered significant
economic growth. Then, in the 1980s, President Reagan reversed
nearly a decade of "stagflation" with a new round of tax
President Kennedy and President Reagan understood that the best
way to put more money in people's wallets is to leave it there in
the first place. After all, when you can keep most of what you
earn, you have more incentive to be productive and earn more. As
your income grows, you spend and save more. And that fuels economic
But the long-term logic of this seems to escape most
Take Sen. Patty Murray, D-Wash. She supports a "sales tax
holiday" because it would "get America's economy back on its feet."
But if such a policy is good 10 days out of the year, why not the
other 355? Don't we want a growing economy year round?
In the end, these tax "holidays" are gimmicks that will have no real, lasting impact on economic growth and job creation. But it's nice to hear liberals admit what the rest of us have known all along -- that higher-than-necessary taxes hurt the economy.
Edwin Feulner is president of The Heritage Foundation, a Washington-based public policy research institute.