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Sales tax holiday on candidate's agendaJenny Price
The Republican candidate for governor wants the state to implement a sales tax holiday for one weekend in early August aimed at helping back-to-school shoppers. Green supports lifting the 5 percent state sales tax on school supplies under $50, clothing and shoes under $100 and computers under $1,500. He argues it would provide meaningful tax relief for working families. And retailers believe the holiday could bring in more business during the back-to-school shopping season. "I think it would generate a ton of activity and I think that would be kind of great," said Jeff Langner, CEO of Morgan's Shoes Inc., which operates three stores at Hilldale, including Stride Rite Shoes and New Balance. "Celebrating an anti-tax day -- Madison is good for a little rebellion." Chris Tackett, president of the 6,000-member Wisconsin Merchants Federation, said he'd like to see a tax holiday "52 weekends a year." "It is some revenue loss, but it's minuscule," Tackett said. "And when you look at Wisconsin always being in the top 10 for taxes, any attempt to reduce some of the tax burden is looked upon with a warm welcome." But would a tax holiday be the boost Green promises for family budgets, or is it just an election-year publicity stunt? "This is obviously a great marketing gimmick for retailers, but customers won't necessarily be the chief beneficiaries," said Jon Peacock, research director for the Wisconsin Council on Children and Families, a nonprofit family advocacy agency. In states that hold sales tax holidays, stores often gear up as if preparing for the holiday shopping rush by pumping up staffing and extending hours to give shoppers more opportunities to take advantage of the event. But Peacock worries that retailers would scale back traditional back-to-school sales and discounts and the sales tax holiday would end up mostly benefiting higher-income families. "They can buy their child's entire wardrobe in August, whereas a low-income family is going to be buying one outfit at a time," Peacock said. Another concern is whether Wisconsin can afford to lose any tax revenue; Green estimates the proposal would cost the state between $5 million and $10 million. "Only a state with extremely strong finances can legitimately consider a holiday at all, even though total revenue loss will be rather modest," wrote John L. Mikesell, professor of public finance and policy analysis at Indiana University, in a recent edition of State Tax Notes. Mikesell, who specializes in state and local government finance and sales and property taxation, contends sales tax holidays "threaten to become a standard feature of state tax systems." The earliest holidays, in Michigan and Ohio in 1980, offered certain American-made cars at a reduced rate, Mikesell said. About a decade ago, the state of New York established a sales tax holiday on shoes and clothing to combat a permanent sales tax exemption in neighboring New Jersey. Since then, more than a dozen states have adopted the holidays, mostly aimed at back-to-school shopping. "A lot of states became careful about tax revenue and pulled back" after the economic downturn following 9/11, said Craig Shearman, a spokesman for the National Retail Federation. That includes West Virginia, which dropped its sales tax holiday in 2004. But in recent years, tax holidays have been on the rise, with 14 states and the District of Columbia having them on the calendar. In fact, a recent report from the national Federation of Tax Administrators called them "flowers in bloom after a particularly cold winter." "Retailers sell more, the customer saves money and the politicians are able to say they gave their constituents a tax break without costing the treasury a lot of money," Shearman said. Most of the tax holidays are narrowly drawn for clothes and school supplies, as Green has proposed, and are not difficult for most stores to manage, Shearman said. "For a major retailer to implement something like this today, it's a matter of keystroke at the corporate headquarters," he said. But Mikesell argues in his article that the holiday can pose problems and higher administration costs for small businesses and "discriminates according to size of the retailer." It's not the first time the concept has popped up in Wisconsin politics. Last year, Rep. Terri McCormick, R-Appleton, and Sen. Dave Hansen, D-Green Bay, proposed similar legislation. Gov. Tommy Thompson floated the idea in 1999 in an effort to jumpstart stalled budget negotiations over what to do with a state budget surplus. Thompson's plan called for a monthlong break in collecting sales tax during the holiday shopping season. In the end, the Legislature elected instead to send each taxpayer a rebate averaging $286. Neighboring Iowa is the only state in the upper Midwest with a sales tax holiday, offering a break during the first weekend in August on clothes and some shoes costing less than $100. And Tackett said that means Wisconsin businesses are losing out on sales as a result. "We shouldn't have Wisconsin families driving to Iowa to avoid paying sales tax," he said. Jenny Price is a Madison freelance writer. She can be reached at jenny.price@gmail.com. jenny.price@gmail.com madison.com ©2009 Capital Newspapers. All rights reserved. |
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