State sales tax holiday back after four-year hiatus
Most clothing, shoe purchases are exempt from usual 6 percent levy
Comptroller Peter V.R. Franchot is crisscrossing Maryland, urging parents to do their back-to-school shopping next week as the state's sales tax holiday returns after a four-year hiatus.
Starting Sunday through next Saturday, the state is exempting from its 6 percent sales tax most clothing and shoes costing less than $100, except for items such as work safety equipment or sports clothes not normally worn on the street.
Franchot (D) was to visit the St. Charles Towne Center mall in Waldorf this morning, a day after visiting Prime Outlets-Hagerstown, part of his five-stop state tour to promote the holiday.
Although the economy still is struggling, Franchot said in an interview that he expects the tax break to lure shoppers. Sales on tax-free items rose 10 percent during the 2001 tax holiday.
"Yes, I think we'll see a jump in retail sales," Franchot said, adding that he believes the publicity will encourage families to shop during that week.
"Everyone benefits from lower prices, more sales and a boost to the local economy," he said.
Despite the revenue hit to the state's coffers about $5 million in 2001 the holidays are beneficial, as the money from the sales "is recycled through the economy very quickly," he said.
Maryland's 6 percent sales tax drives business out of state, especially to Pennsylvania and Delaware, neither of which taxes clothing, said Patrick Donoho, president of the Maryland Retailers Association. The tax holiday might encourage Marylanders to spend their money closer to home, he said.
Kris Winternitz, a spokeswoman at the Waldorf mall, said she expects a rush of shoppers, based on what she saw during previous sales tax holidays.
"The last one we had was just a weekend, and we did see an increase in sales in just a few days. Unfortunately, the state of Maryland hasn't been doing it for a while," Winternitz said.
The Hagerstown outlet center is expecting "record traffic" next week, said spokeswoman Karen E. Fluharty in a statement.
But some analysts deride sales tax holidays as gimmicks that do little to spur the economy and merely encourage consumers to rearrange their shopping schedules without boosting overall sales.
"Despite their political popularity, sales tax holidays are based on poor tax policy and distract policymakers and taxpayers from real, permanent, and economically beneficial tax reform," according to a recent study by the Tax Foundation, a nonprofit research group in Washington, D.C., that typically espouses lower tax rates.
"Sales tax holidays introduce unjustifiable government distortions into the economy without providing any significant boost to the economy," the report states. "They represent a real cost for businesses without providing substantial benefits. They are also an inefficient means of helping low-income consumers and an ineffective means of providing savings to consumers."
According to the foundation, 18 states will have sales tax holidays this year, up from 16 in 2009 and 17 in 2008.
Judy White, manager of the Belk department store in California, said she expects more sales, and the store will be offering other discounts as enticements.
"I think the impact will be very favorable, and in other states I've worked in, it's always been a very good thing, with a lot of extra sales generated in that period" without sales tax, she said.
Because the exemption applies to used goods as well as new, Lisa Veon, owner of Hug Bug Children's Boutique, expects a crush of customers.
"A lot of people are smart enough to be frugal about back-to-school shopping these days," she said.
Ann Kaine, volunteer manager of Shoppe for Hospice, a charity thrift store in Huntingtown, said she doesn't know if the holiday will boost sales. She learned of the measure from a visitor and said that, as the store celebrated its one-year anniversary July 29, she didn't have the retail experience to predict how shoppers might react.
"Well, hopefully it will bring in more customers for our shop. One hundred percent of our proceeds will go to the Burnett[-Calvert] House for hospice. Everyone who works there is a volunteer and the entire shop was put together by volunteers throughout the community. Hopefully it will be another opportunity for people to come out and support the store," Kaine said.
The holiday isn't likely to affect Educate & Celebrate, either, said Laurie Uherek, who owns the two school supplies stores in Prince Frederick and Waldorf, because her merchandise isn't exempt. With luck, though, less expensive clothes will mean consumers have more left over for notebooks and pencil cases, she said, adding that she hopes the legislature will consider including school supplies in the future.
"I think it's great, but I wish they would extend it to school supplies ... It's a shame they don't extend it to [other] essential needs people have," she said.