ANNAPOLIS- Back-to-school clothes may be five percent cheaper next year if some legislators win General Assembly approval for a bill creating a sales tax-free week in Maryland.
Delegate Jean Cryor, R-Montgomery, introduced a bill Thursday to designate one tax-free week next year. During that week, sales and use taxes would be suspended on certain purchases of clothing and lodging.
“It’s good for retailers, good for consumers and good for the state of Maryland,” Cryor said. “Five cents off the dollar is terrific in any circumstance.”
The tax-free week is slated for the end of the summer right before children return to school, Cryor said. The bill is intended to encourage families to shop for back-to-school clothing in Maryland, rather than in neighboring states with little or no sales tax.
Pennsylvania has no sales tax on clothing or shoes and Delaware has no sales tax at all. “It’s usually worth (a family’s) while to get in the car and drive the distance,” Cryor said.
Keeping shoppers in the state is especially important for retailers on the Eastern Shore, where neighboring Delaware shops often lure Maryland customers. For people living in the mid-shore region, Delaware is only a half-hour drive away.
“Being on the Eastern Shore, everybody runs over to the outlets in Rehoboth,” said Delegate Adelaide “Addie” Eckardt, R-Dorchester, “rather than staying in Maryland.”
The tremendous growth in those retail outlets is one of the biggest concerns of the Maryland Retailers Association, said President Tom Saquella.
Saquella couldn’t provide figures to show how much business is lost to Delaware, but he said, “We’re starting to feel it.”
When people drive to the Eastern Shore, Saquella said, one of the first signs they see after crossing the Bay Bridge promotes 104 tax-free stores in Rehoboth.
“They are certainly growing at the expense of Maryland retailers,” Saquella said. “We’re hoping [this bill] can help.”
Both Connecticut and New York have enacted similar measures, Cryor said, and seen “phenomenal success.”
New York City first tried the experiment two years ago for one week in January and September. The city’s 8.25 percent sales tax was suspended on all clothing and shoes below $500.00. Since January 1997, they have run the promotion five times and have recently enacted a law to eliminate sales taxes on all shoes and clothing priced under $110.00.
“I think it’s been a success in other states,” said Delegate James Ports, R-Baltimore County, “so I’m definitely willing to try it.”
Sponsors of the bill point out that little tax revenue would actually be lost in the tax suspension, because the money would be recouped in other ways like with personal income taxes.
Maryland may be giving up a little sales tax, Ports said, but every time consumers make a purchase, they support someone else’s income.
“It’s a little way to spur the economy,” he said.
Ports, a co-sponsor of the bill, said it’s also a family-friendly bill. Because it’s targeted at a time when families will be spending money preparing for the school year, it gives them a break on the expenses.
Delegate Cryor, who has reared three children, is also interested in the benefits for families. “Sales tax is always a problem for families,” she said, “because most of their money is spent on consumer products.”
Cryor said she hopes the program will eventually be expanded to several weeks throughout the year.
A similar bill approved by the House last year died in the Senate Budget and Taxation Committee without a vote. That bill called for two weeks of tax-free shopping a year. Delegate Dana Lee Dembrow, D-Montgomery, lead sponsor of last year’s bill, expects that retailers will “piggy-back” on the tax-free week with their own discounts as they did in New York.
The state may not recoup all of the lost sales tax with personal income taxes, Dembrow said, but the benefit is that more money will be spent in Maryland. The no-tax rule would also apply to hotels and motels in an effort to boost tourism in the off-season, said Delegate Bennett Bozman, D-Worcester. Bozman, one of the 31 co-sponsors of the bill, said lifting the hotel tax would especially benefit resorts at Wisp in Garrett County and Ocean City in Worcester. -30-