Are Sales Tax Holidays On The New Administration's Agenda
Friday, December 26, 2008SUZANNE PRATT: President-Elect Barack Obama is far from Washington today, enjoying some rest and relaxation in Hawaii. But in the nation's capital, lobbying groups are hard at work trying to influence the next president's massive economic recovery plan. A national sales tax holiday is one suggestion retailers are currently floating. Darren Gersh did some comparison shopping on the idea.
DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: Yes, you can get 30, 60 percent, even 70 percent off now. But retailers argue a national sales tax holiday would help consumers find deals in March, July and October, times when the discounts are not so deep. The National Retail Federation's Scott Krugman says it could be an important part of the Obama economic recovery plan.
SCOTT KRUGMAN, VP, INDUSTRY PUBLIC RELATIONS, NATIONAL RETAIL FEDERATION: You got to have something in there to create jobs, but we understand that's long term. You need something in there short term while you're waiting for these jobs to come to fruition.
GERSH: The retail Federation says the sales tax holiday could last a total of 30 days and cover everything except firearms and tobacco. The Federal government would reimburse states for up to $20 billion in lost revenue. Krugman says the holiday would be more effective than simply handing out rebate checks.
KRUGMAN: This works more because it only rewards actual spending, where the rebate checks, people were able to save them. And that was good because it increases the savings rate, but it doesn't do a lot for the economy.
GERSH: Critics like economist Dan Mitchell dismiss the holiday as a gimmick that merely shifts money around, but does nothing to increase overall spending.
DANIEL MITCHELL, SENIOR FELLOW, CATO INSTITUTE: Let's say there is a sales tax holiday at some point next year. If I have a big ticket item, like I want to buy a computer for one of my kids for school, I'll make sure I buy it during the sales tax holiday.
GERSH: Retail analysts like Marshal Cohen at NPD Group don't go that far. Cohen thinks a tax holiday will help, but he says the bigger problem is that retailers got lazy in the good times when consumers would buy whatever was on the shelf. Taking off 6 to 8 percent in sales tax won't help as much, Cohen says, as retailers doing the hard work need to sell more compelling products.
MARSHAL COHEN, CHIEF INDUSTRY ANALYST, NPD GROUP: When I speak to consumers, a lot of them say yes I am concerned about the job market, but as long as I have my job and I know that I'm a little bit secure for a time period, you know I still want to spend for a holiday. But there's nothing out there that's exciting for me, so why not take a step back and say, hey, do I really need this? And if it really isn't a great product, what do I need to spend that kind of money for?
GERSH: There's another question members of Congress will be asking themselves about a national sales tax holiday: is there a better way to spend tax payer dollars? Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.
