The Milford Daily News: Some question value of sales tax holiday
media mentionBy Laura Krantz/Daily News staff
MetroWest Daily News
Posted Jul 13, 2012 @ 01:11 AM
FRAMINGHAM —
When Jim Green heard about this year’s sales tax holiday, his reaction was “Oh my God!”
Green owns Automatic Appliance Service in Framingham, a six-employee family business that recently celebrated its 50th anniversary.
“You can do a month’s worth of business in a day,” Green said. But that’s not necessarily a good thing.
“I’ll be very low on the sales side for about two weeks before,” he said.
Gov. Deval Patrick on Sunday announced a two-day sales tax holiday as part of next year’s budget.
Republican legislative hopeful Marty Lamb, challenging Rep. Carolyn Dykema, D-Holliston, for her seat in the House, praised the move and said the state should go further.
“Why not make it permanent,” Lamb asked, calling for a law to make the day an annual event.
Since 2004, legislators each year except 2009 have created a sales tax holiday, saying it especially helps those hit hardest by sales tax, the low-income.
Dykema said the holiday is also good for small businesses.
“As much as it means to consumers, I think it’s also a boost to the economic community in our local towns,” she said.
At the appliance store, though, Green disagreed.
“The tax-free holiday is harder on the small business,” he said.
Green said they don’t have the staff or advertising budget of big box stores. And it forces him to decide whether to stay open on Sunday, his day off.
Some economists have also suggested the day is a gimmick.
“This is fundamentally a politically popular idea but with little economic benefit,” said Michael Widmer, president of the Massachusetts Taxpayers Foundation, an independent public policy group.
Widmer said buyers wait to purchase on that day but don’t necessarily buy more, and said annual revenue shows no big increase in years with a tax holiday.
“It’s a feel-good thing for politicians and it does nothing to promote business,” said Mike Kane, Ashland Business Association vice president.
A 2011 report by the Institute on Taxation and Economic Policy called the day a “boondoggle” that does little for those it claims to help.
Widmer pointed out that food and clothes are exempt from sales tax already in Massachusetts.
“From a social point of view this doesn’t really have any meaningful impact, either,” he said.
MetroWest shoppers yesterday seemed to agree.
“It doesn’t influence me at all,” said Elsie Kagoda, a mother of three heading into Walmart to buy eggs and milk. “I only buy what’s necessary.”
Barry Barton, of Framingham, is re-doing his kitchen and was at Lowe’s yesterday to shop for new cabinets, a dishwasher and an oven. He said he won’t wait for the holiday to buy.
“It’s not that much of a savings, I don’t think,” Barton said.
But others disagree.
“It’s like Christmas in August for retailers,” said Jon Hurst, president of the Retailers Association of Massachusetts.
Hurst estimated the weekend will bring five times as much retail sales as a typical summer weekend, and stop buyers from dodging sales tax by buying online or in New Hampshire.
“All you need to do is go into the stores that weekend in Massachusetts,” Hurst said, pointing out that the day also benefits restaurants and simply prompts people to spend more.
“Those that say it doesn’t benefit the economy don’t understand the consumer and the buying habits of the consumer,” he said.
The Department of Revenue estimates the holiday will cost the state $20 million in sales tax revenue.
The governor in his budget included a plan to make up the estimated loss with one-time settlement money that would otherwise go to the state’s savings account.
A 2011 DOR report found that last year’s two-day sales tax holiday cost the state $20.98 million.
The report estimated the that the boost to related economic activity was less than $2 million.