ANNAPOLIS – Families would see their back-to-school shopping bills slimmed if sales taxes are lifted for five days this August.
A bill discussed Thursday in the House Ways and Means Committee would exempt clothes and shoes from Maryland’s 5 percent sales tax.
The exemption applies to purchases less than $100, although the bill’s sponsor, Delegate Jean Cryor, R-Montgomery, said shoppers can split their items into separate transactions to meet that requirement.
The break does not apply to pencils, paper and other school supplies. Cryor said she did not include supplies in the bill because she wanted to make it more palatable to fiscal hawks.
The tax holiday will not be made permanent. Whether holidays will be enacted in future years depends on whether the state’s economy is good, Cryor said.
A sales-tax holiday has not happened in Maryland since August 2001, when the state lost an estimated $5.1 million in tax revenue, according to the Comptroller’s Office. Then an economic downturn forced the state to maximize every revenue source, and the holiday has since been on hold.
But now, Cryor said the time is right to bring it back.
Comptroller William Donald Schaefer strongly supported the tax holiday. The lack of a holiday causes many Marylanders to drive to buy tax-free goods in Delaware and Pennsylvania, he said.
Schaefer tried to allay concerns that it could drain needed revenue from the state, a concern that had canceled the holiday in recent years.
“It’s good for the economy; it’s good for the people to have an opportunity to buy without sales tax, all that sort of stuff. And it does not hurt us,” Schaefer said.
Administering the tax holiday this year would cost about $101,000, mostly to promote it, according to the Department of Legislative Services.
Legislative Services said it’s difficult to estimate potential lost revenue. But it would likely be less than the $5.1 million lost in 2001 because the break would be limited to five days, rather than the previous seven days.
But the department reckons that businesses are more likely to benefit from the holiday as they pack in more bargain-hunters.
The Ways and Means Committee has not yet voted on the bill.
“Legislators last time got more thanks for this tax break than they did for the 10 percent income tax break,” said Tom Saquella, president of the Maryland Retailers Association. “But this is something (consumers) can see and feel right at the cash register.”