ANNAPOLIS – Despite difficult budget times, lawmakers hope to bring back tax-free weeks on clothing, backpacks, and perhaps even computers.
Seven bills are before the General Assembly for such measures, the first to be heard next week.
The bills all follow the model of last year’s popular Shop Maryland Week, Aug. 10-16, which relieved consumers of the state’s 5 percent sales tax for clothing under $100.
“No one just liked it, they loved it,” said Delegate Jean Cryor, R- Montgomery, regarding the week.
The original measure passed overwhelmingly in 2000 with 66 delegates signing on as sponsors of the bill.
But the economy has declined since then. And with the state’s projected $1 billion deficit, support might not be so strong.
“Remember that we have a budget shortfall,” said Senate Budget and Taxation Chairman Barbara Hoffman, D-Baltimore.
Hoffman said she voted reluctantly for the last bill and would wait for more information before supporting it again.
“It’s poor tax policy,” Hoffman said. The state loses lots of money and the customer only gets a little money back.
“Is the juice worth the squeeze?” Hoffman said.
Cautious advocates have recommended the legislation be reconsidered yearly, rather than become a permanent relief measure.
“The bottom line is the bottom line,” said Michael Golden, a spokesman for Comptroller William Donald Schaefer. “In times of economic stress, we don’t want to take away a revenue source permanently.”
While Cryor has agreed to the compromise with the comptroller, she still said the bills are good for the economy.
“If there is any sign you want to give to the people of Maryland to keep their confidence up, this is it. It has a huge good feeling to it,” she said.
Last year, people came from out of state to shop and stores often threw additional sales and promotional events to attract shoppers.
Payroll and sales tax holidays best stimulate slumping economies, Cryor said, noting a January 2002 Congressional Budget Office report that contained such recommendations.
The bills were initially designed to help businesses near the state’s northern and eastern borders where nearby Delaware has no sales tax, and Pennsylvania has no tax on apparel.
Stores lose significant customer business through those tax policies, said Sen. John J. Hafer, R-Allegany.
While national apparel sales increased by 9.25 percent from 1996 to 1998, Tom Saquella, of the Maryland Retailers Association, said such sales in Maryland decreased by half a percent.
Saquella has lobbied heavily for the bills. The tax holiday “kept a lot of people shopping in Maryland rather than Delaware,” he said.
Critics of the bill say the holiday doesn’t gain shoppers, it just shifts the time of their purchases.
The comptroller’s office estimated that the August 2001 tax holiday cost the state $5.1 million in revenue, $1.6 million less than expected.
Proponents said the revenue is not lost since the shopping would have gone elsewhere and additional purchases of taxable items are made while shopping.
“It’s a paperless coupon. It lures people into the store,” Cryor said.
The comptroller’s office did not have figures to show whether revenue is not lost, because stores participated poorly in their studies, Golden said.
Yet the comptroller still wrote that the week was a success in his assessment.
“We feel there was spillover effect,” Golden said. While people were shopping, they went to other stores where items were taxable and bought things with their savings.
Sales increased by 10 percent compared to last year in stores directly affected by the holiday, according to the office’s figures.