Why This Weekend's Tax Holiday Hurts

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Dick Lavine /(512) 320-0222 x 101

August 15, 2007

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Beginning Friday and continuing throughout the weekend, Texans won't be charged sales tax on clothes, shoes, or school backpacks that cost less than $100. Sounds pretty good, right? The truth is that while the holiday was created to give lower-income families a break on taxes, the sales-tax holiday ends up benefiting higher-income families who can afford to shop in bulk. Families with enough income to pay for a school year’s worth of clothes do better than families who can buy just one outfit at a time. In fact, one study showed that more than 40% of the total tax savings goes to families with incomes over $70,000.