Tax holiday for school supplies proposed

The Revenue Committee heard testimony Feb. 19 on a bill that would create a back-to-school sales tax holiday for clothing and school supplies.

LB974, introduced by Sen. Rick Kolowski of Omaha, would implement an annual sales tax holiday on the first Friday, Saturday and Sunday in August. Clothing items that cost less than $100, school supplies that cost less than $100 and computers that cost less than $750 would be exempt from sales tax during the holiday.

Computer software, clothing accessories, sports equipment and art supplies would be among the items not subject to the exemption.

The bill would reduce state sales tax revenue by an estimated $16.9 million in fiscal year 2016-17 and a further $17.3 million in FY2017-18.

Kolowski said 17 states, including Iowa and Missouri, have similar back-to-school sales tax holidays that generate retail sales second only to Black Friday.

“As a retired educator I know how much money is spent on required and general back-to-school items,” he said. “This bill would give hard-working parents a break.”

Jim Otto, president of the Nebraska Retail Federation, testified in support of the bill. He said the state would lose sales tax revenue during the sales tax holiday, but the holiday likely would drive sales of non-exempt items.

Tiffany Joekel, policy director at OpenSky Policy Institute, testified in opposition to the bill. She said sales tax holidays encourage families to shift the timing of purchases they would have made anyway and do not stimulate sales that wouldn’t have occurred otherwise.

Upper-class families with more flexible incomes are best able to shift the timing of their purchases, Joekel said. If the intent of the bill is to help low- and middle-income families, she added, a better solution might be to offer a refundable sales tax credit.

The committee took no immediate action on the bill.