The power to tax is mighty—and essential. But so is the power not to tax. Federal, state, and local governments can impact consumer buying through the imposition of, or exemption from, sales tax. From California’s 7.5 percent sales tax to Colorado’s 2.9 percent sales tax, states use tax revenue to provide critical services to citizens. When is it appropriate for a state to forego some tax income by exempting a consumer good from sales tax?
Many states exempt food, some exempt non-prescription medical products, and a small number exempt clothing. Some states offer tax-free weeks, typically before school starts, during which clothing and school supplies are exempt from sales tax. These exemptions incentivize the purchase of certain goods. This power not to tax could be used more effectively, however, to encourage the purchase of consumer goods that support public health and safety. A few states have passed sales tax exemptions that fit the bill for public health, including exemptions for child car seats, bicycle helmets, and emergency-preparedness. States interested in reducing morbidity and mortality on the road, on the water, and in the home might consider tax exemptions for protective equipment such as motorcycle helmets, personal floatation devices (PFDs), and fire safety equipment such as fire extinguishers and home smoke detectors.
There is an easy way to prevent more than half of child fatalities resulting from motor vehicles crashes make sure that all kids are properly restrained while in a car. Indeed, all states impose a requirement for child safety seats with fines for violations, but only a handful of states exempt child safety seats from sales tax. Connecticut and Florida provide a tax exemption for child car seats from a sales tax of 6.35 percent and 6 percent, respectively. Hawaii, instead of exempting child safety seats from sales tax, provides a tax credit of $25 per year for the purchase of a booster or car seat. The simple incentive of tax credits and tax exemptions make it easier for consumers to purchase these life-saving seats and communicates to citizens the importance of using them.
For individuals seeking advice on choosing the most appropriate car seat for their child, the American Academy of Pediatrics provides guidance on, and comparison of, many child safety seats based on the product’s cost and the child’s height and weight.
Bicycle riding is an activity that provides children with tremendous health and developmental benefits including motor coordination and physical activity. Yet these benefits do not come without risks, which can include facial injuries and traumatic brain injuries. Despite these risks, and the fact that a bicycle helmet can reduce the risk of a child’s brain injury by 33 percent, only 21 states and the District of Columbia require young riders to wear a bicycle helmet. Like child safety seats, a few states provide a tax exemption for bicycle helmets. Florida provides a sales tax exemption of 6 percent specifically for youth bicycle helmets. Connecticut, recognizing that head injuries are not unique to young riders, exempts all bicycle helmets from a sales tax of 6.35 percent.
Another approach to bicycle safety is to incentivize the purchase of light or reflective clothing to alert others sharing the highway of a bicyclist’s activity. Taxpayers can stretch their tax dollars by taking advantage of tax-free holidays. Alabama, Connecticut, and Maryland are among the states that provide a tax exemption for general clothing during a designated tax-free period. The option to buy light or reflective clothing tax-free during the designated tax-free holiday provides consumers with an additional incentive to purchase items aimed at bicycle injury prevention.
States continue to wrestle with balancing the necessity for motorcycle helmet requirements and people’s desire for freedom of the road. Some states, such as California and Maryland, have universal motorcycle helmet laws, yet other states only have partial helmet laws or no law at all. Florida has a partial helmet law, allowing riders over the age of 21 to ride a motorcycle without a helmet—all that is required is for the rider to carry insurance providing a minimum coverage of $10,000 for medical care associated with a motorcycle crash. The National Highway Transportation Safety Administration (NHTSA) estimates 1,772 motorcyclists’ lives were saved in 2015 and an additional 740 more lives could have been saved with the use of motorcycle helmets. Partial helmet laws that only require minimum insurance coverage allow riders to avoid wearing helmets, thus not protecting themselves against motorcycle injuries. Further, the coverage requirement of many partial helmet laws does not even begin to approach the very large costs associated with non-helmeted motorcycle crashes.
In 2017, New York sought to encourage motorcycle riders to purchase helmets by exempting motorcycle helmets from the state sales tax through Senate Bill 951. While the New York bill did not pass, it is a step in the right direction for states to incentivize riders to purchase motorcycle helmets before riding.
Drowning is ranked fifth among the leading causes of unintentional death in the United States. One of the greatest contributing factors in boating-related deaths is the failure to wear a personal floatation device (PFD). Yet states like Florida and New Jersey specifically declare PFDs as consumer items for sport or recreational use and therefore not exempt from state sales tax during tax-free holidays. Connecticut has broken from the pack by exempting from sales tax safety apparel used by an employee; PFDs that can be worn are eligible for this exemption. Regardless of whether the user is at work or at play, state sale tax exemptions could incentivize the use of life-saving PFDs.
Fires are a leading cause of home injuries and 80 percent of all fire deaths occur in the home. Federal law already provides incentives for businesses to purchase and install fire safety equipment such as fire alarms, yet the purchase of fire safety equipment for the home is typically viewed as a personal expense not deductible for individual taxpayers. Some states impacted by natural disasters, like hurricanes, have filled in the gap for individuals through emergency preparedness statutes. For example, in Texas, taxpayers can purchase smoke detectors and fire extinguishers that cost less than $75tax free during a limited period designated for tax-free purchases for emergency preparedness supplies.
Policymakers have shown interest in providing tax incentives for fire safety in the home but that interest has not yet been put into law. In 2016, New Jersey considered a bill that would have exempted smoke detectors and fire extinguishers from sales tax. The bill did not pass.
Providing tax incentives allows taxpayers to benefit from making purchases that can protect them from injuries and death on the road, on the water, and at home. Additional information about the safety measures and related tax incentives outlined in this post can be found in our Policy Brief. States can and should enact laws that leverage tax incentives to advance evidence-based interventions that protect health.
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This blog was written by Ashley Creech and Yuezhu Laura Liu, student attorneys, under the supervision of Kathleen Hoke, Director, and Kerri McGowan Lowrey, Deputy Director, of the Network for Public Health Law – Eastern Region Office at the University of Maryland Carey School of Law. The Network for Public Health Law is a national initiative of the Robert Wood Johnson Foundation. The Network provides information and technical assistance on issues related to public health. The legal information and assistance provided in this document does not constitute legal advice or legal representation. For legal advice, please consult specific legal counsel.