Ka-ching - A Column from "The Tulsa World" on the Sales Tax Holiday
August 2nd, 2009
That $700 billion stimulus package passed by Congress in February might end up being the greatest agent of change since the New Deal. But it is not going to be a Big Deal in people's lives until they actually see tangible results.
In an era of instant gratification Americans are having trouble getting their arms around something so big, so complex and so slow. The public perception of economic stimulus, I'm guessing, is less about public works and more about what works for the public on a personal level, and pronto.
Beginning at 12:01 a.m. Friday and for the next 72 hours, precisely that kind of economic stimulus will unfold across Oklahoma at retail outlets, big and small. Malls will fill up with battalions of wild-eyed moms who are only too willing to resort to hand-to-hand combat if it means saving, say, 72 cents on a three-pack of Harry Potter underwear for their kid.
The annual Sales Tax Holiday is back by popular demand. It marks the only time of the year that consumers can get a limited number of items at a limited price for a limited amount of time.
No one, however, is focusing much on all the restrictions — that long list of dos and don'ts, which ultimately will trigger some ugly psycho-dramas if not gunplay at the checkout register.
Everybody should know the rules — no big ticket items like mobile homes, mink coats, home tanning beds or Labradoodles. In Oklahoma, the sales-tax exemption applies only to clothing and footwear under $100 per item. In other words, don't plan to accessorize. No purses, belt buckles or nose rings. Rubber pants? Yes. Bridal apparel? Yes. Rented tuxedos? No. Halloween masks? Maybe.
Shoppers are not going to experience buyers' remorse immediately, right? The pain will be felt much later when it sinks in that they racked up $650 in balances on store credit cards at 21.9 percent interest in order to save roughly 8 percent in sales tax.
There's just something extra special about shopping and getting to stick it to the man, all at the same time. Never mind that we, as taxpayers, are the man. None of those shoppers jumping into the mosh pit, formerly known as the jeans aisle at Walmart, is going to be worrying much about how the state will make up the millions it's forfeiting in lost revenues and the other millions needed to reimburse cities and counties. It's all water off the same paddle, right?
And besides, if this year is like last year, the sales tax holiday will boost retail sales by a whopping $100 million because shoppers will buy items that they didn't intend to buy and items not on the tax-exempt list. But this isn't last year. Times are much tougher and that lost revenue may be noticed more acutely.
Sen. Jay Paul Gumm, who fought years to get a bill approving a sales tax holiday, says that even with lost revenues, the holiday helps the state and its shoppers.
"Oklahoma families get to keep more of their money, spending it on items they need rather than coughing it up in the form of a regressive sales tax." The sales tax holiday is good policy, Gumm said, that makes good sense for consumer and retailers alike.
Critics don't always agree for a variety of reasons.
In USA Today, Matt Gardner, state tax policy director at the Institute on Taxation and Economic Policy, said the sales tax breaks makes the most sense for lawmakers because it's cheap and avoids reform.
One Texas legislator, who'd helped pass 400 bills over the course of his career, said he received more thank-yous for the sales tax holiday than any other action.
Tax holidays definitely have a psychological impact — the kind that doesn't come from a $2.25-a-week tax cut spread over 52 weeks. And for a state that was celebrating free stuff even before statehood — think land rushes — the holiday may have special appeal.
In 2007, state officials estimated that shoppers saved $6.4 million in state, county and local sales taxes during the holiday. That figure rose to about $6.58 million the second year. Despite the tax loss, total state sales tax revenues jumped by $4.6 million last August, all powered by the holiday, Gumm said.
And there's another positive. Since 2007, Oklahomans have been home for the holiday. For the nine long years before, many shoppers crossed the Red River to celebrate Christmas in August in Texas, which started its sales tax holiday in 1999.
Eventually, the Oklahoma Legislature followed suit after finally recognizing that nothing provides a politician with a bigger bang for the buck than sponsoring a sales tax holiday.
Now, at least 16 states offer the tax break. Florida has a sales tax holiday for clothing and school supplies in August. But in June it has a holiday for hurricane preparedness — everything from reusable ice to cell phone batteries are exempt from sales taxes. Georgia has two sales tax holidays, one back-to-schooler and another for energy-efficient products. South Carolina last year offered a sales tax holiday on handguns, rifles and shotguns. Now there's a fun combo — frenzied crowds and lots of tax-free weapons.
In 2006, Massachusetts lawmakers passed a law creating the most generous tax holiday in the U.S. All retail sales under $2,500 were exempted from the state's 5 percent sales tax for two days. This year, given the bad economy, a new governor put the brakes on the sales tax holiday.
Ditto for the District of Columbia, where a $600 million shortfall is creating some long faces among consumers who saw their sales tax holiday repealed.
In Oklahoma the annual Sales Tax Holiday will go on, even as state revenues fall away daily. The holiday will be celebrated as an easy, quick, personal and relatively harmless economic stimulus.
Or so we believe.
By Julie DelCour - Associate Editor - The Tulsa World