, Salem, MA


August 16, 2011

My View: Tax holiday good for business, consumers

For the seventh time in the past eight years, people across Massachusetts enjoyed a weekend of tax-free shopping. This past Saturday and Sunday, stores and malls were packed with consumers enjoying a 6.25 percent savings on items up to $2,500.

Starting with the first "sales tax holiday" held in 2004, shoppers have embraced this late-summer event, giving the state's economy a much needed economic boost at a slow time.

While virtually all of our elected leaders agree that the sales tax holiday is good politics, some question whether it is good policy.

Here's why it is:

It keeps Massachusetts dollars in Massachusetts.

The past seven sales tax holidays have been responsible for weekends cumulatively generating sales of $3.5 billion in Massachusetts. With tax-free New Hampshire to the north and the Internet at their fingertips, many consumers continue to spend their money outside the commonwealth. Most of the dollars spent during these tax-free weekends wouldn't have otherwise occurred locally, but gone elsewhere.

It benefits low-income earners.

Gov. Deval Patrick has properly observed that the sales tax is "inherently regressive" and disproportionately hits low-income families.

Those on the lower end of the economic ladder can't access tax-free shopping like middle- and upper-income families do. Driving to New Hampshire or shopping online isn't possible for many because they don't have a car, Internet access or the credit cards necessary to make online purchases.

The sales tax holiday helps make our tax laws a bit less regressive for families during the challenging back-to-school shopping season.

It's revenue-neutral.

Sales that occur in Massachusetts during the tax-free weekend fall into two basic categories: Sales that are recovered from other tax-free options and impulse buys. In either case there's no tax loss because the sales weren't going to happen locally anyway.

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