Impact of Tax Holidays on North Carolina - Coursework Example

General Taxes Impact of Tax Holidays on North Carolina Yield Impact The yield of the is adversely affected by the sales tax exemption. For example, retailers, revenue departments, and local governments are forced to document and monitor the distinction between ineligible and eligible products. The sales tax holiday has resulted in enormous losses each year (Sirot, 2011). Equity ImpactSales tax is the main driver of the upside-down tax system. The middle-income earning North Carolinas (earning around $37,000 per year) pay excise and sales taxes 4 times more than individuals earning more than 1 million U.S. dollars per year.

The sales tax holiday has done very little to address these inequities. The holiday excludes all taxpayers regardless of their wealth. The budget of these households (the wealthiest) is more flexible and they can effortlessly time their purchases in order to take advantage of the limited-time offering (Sirot, 2011). Administration and Compliance ImpactNorth Carolina state administration has failed to collect enough revenues to support its collective commitment to educating the children, protecting the neighborhoods, and supporting the elders.

The big challenge is that the revenue collected by the state is from those who have the least capability to pay (Sirot, 2011). Economic ImpactThe sales tax produces nearly a third of North Carolina’s revenues. However, the sales tax holiday leads to a loss of close to $12 million per year; this is the money that can fund early childhood education or enhance the educational attainment level of North Carolina's young workforce. The sales tax holiday undermines the capability of the revenue system to offer support to shared investments (Sirot, 2011).