Retailers want piece of stimulus pie

December 23, 2008 7:10:12 PM PST
The world's largest retail trade association is lobbying the Obama administration for a sales tax holiday.

The National Retail Federation wants a series of sales tax holidays inserted into the economic stimulus package that the Obama team is already working on. Some states have tried suspending sales taxes over short periods of time and there is evidence that it has worked, sort of.

In a down economy retailers are looking for ways to bring in more shoppers. Some figure if you suspend the sales for ten days or so it could induce people to shop.

Blanca Cohen of San Mateo says she is looking for any chance to save on what she needs to buy.

Stores in one San Mateo mall are advertising 30 to 50 percent off.

When asked what she thought about putting up a sign saying 8.25 percent off, Cohen told ABC7, "That's probably not a place that we would go, because it wouldn't be enticing."

Yet, California's sales tax is 8.25 percent.

Maybe it would help if that 30 percent off was used on an expensive item like a $3000 suit.

"Well in this challenging environment any impetus would help sure," said Barcelino Store Manager Siavosh Shahrestani.

The proposal is to suspend sales taxes for ten days during three different times of the year; Ten days in March, ten days in July, and 10 days in October.

ABC7 Political Analyst Professor Bruce Cain points out that, "First of all it's not a new idea. This was something that was brought up in 2001."

Cain says the tax holiday idea resurfaces every time there is a recession. And, he says it is complicated. 45 states have sales taxes but five states do not.

"Secondly," he says, "The rates of the sales taxes are very, very different."

Although, Professor Cain adds that is not the big problem with the proposal.

"The problem is, does it really work? Will people spend extra money as a result of this? Or, will they simply reschedule and retime their purchases, in which case nobody is better off? And meanwhile, the states are out that money and the federal government's out that money," he said.

Blanca Cohen said she would not buy an expensive item to save the sales tax.

But, this has been a season of giving by the federal government and it is understandable that retailers want their turn.

Retailers may be mistaking Barack Obama for a fat and jolly elf because the federal government would have to reimburse states for the lost sales tax revenue.

A spokesman for California's Department of Finance says that idea will not fly because the federal government does not have enough money.

Professor Cain believes the Obama stimulus package will be much more about providing jobs and rebuilding the nation's roads, bridges and other infrastructure.


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