The Ohio Senate unanimously approved a bill Wednesday that would create a permanent three-day sales tax holiday for school items and clothing, designed to benefit Ohio families.
Senate Bill 226, introduced by Sen. Kevin Bacon, R-Minerva Park, would create a period beginning on the first Friday of August each year, during which school supply items valued at up to $20 individually and clothing items valued at up to $75 individually would be exempt from local and state sales taxes.
The state legislature previously passed temporary sales tax holidays in 2015, 2016 and 2017. Bacon said the tax break would benefit both the state’s economy and taxpayers. The Ohio House and Gov. John Kasich will have to approve the bill to make it official.
"We were producing economic stimulus without a loss to the state, and we we're helping our taxpayers who might be in need," Bacon said.
The legislature had trouble passing last year's temporary tax holiday bill in time, Bacon said. He said a permanent tax bill would help the state legislature avoid time constraints while still allowing them to make changes to it.
After the 31-0 vote, Senate President Larry Obhof said the tax holiday is good for Ohio families, and also draws residents of other states to purchase goods in Ohio. The Medina Republican said companies sometimes offer discounts to draw even more customers in.
"People go get necessities but the stores also started to have larger sales for that weekend to bring people in," Obhof said.
The state has previously benefited from the tax holidays, according to a previous Dispatch report. In the report, Julie Heath, the director of the University of Cincinnati Economics Center, said the despite the lack of sales tax, state saw a net gain of $4.7 million in tax revenue
Some opponents of sales tax holidays say they don’t change the amount of money spent on goods, but rather the timing of the sales of goods. According to a report by Joseph Bishop-Henchman and Scott Drenkard of the Tax Foundation, a conservative tax-policy research group based in Washington, D.C., tax holidays can slow business on the dates surrounding them.
"Shoppers waited until the holiday to purchase exempted goods, thereby slowing sales in the weeks prior to and following the holiday," the report reads.
The report also says retailers sometimes are led to raise prices due to a low supply but high demand for goods.
"Because the amount of inventory a retailer can have on hand is finite, many retailers understandably respond by raising prices rather than running out of stock too quickly," the report reads. "When lawmakers create sales tax holidays, the assumption is that the benefit will be passed on to consumers in the form of lower prices. In reality, retailers often absorb those benefits."
The state's official fiscal analysis for the bill estimates the bill would reduce state revenue from the tax by up to $16.9 million in 2020, with local governments losing around $4.7 million. The Public Library Fund and Local Government Fund would lose around $600,000 in distributions.
In 2015, Ohioans saved more than $3.3 million in taxes, according to a previous Dispatch report. Ohio was one of 17 states that participated in tax holidays last year.
Bennett Leckrone is a fellow with the E.W. Scripps Statehouse News Bureau