NATIONAL TAX HOLIDAY PROPOSED

Byline: Kristi Ellis

WASHINGTON — Representative Lindsey Graham (R, S.C.) introduced national sales tax holiday legislation in the House Thursday that aims to save consumers as much as $6.5 billion in taxes, representing $100 billion in spending over a 10-day period.
The National Retail Federation, which first proposed a sales tax holiday in an Oct. 4 letter to President Bush, is in discussions with a number of senators to try to move the measure as a component of an economic stimulus package, according to Scott Cahill, vice president of government and industry affairs at the NRF.
“This bill is a form of economic stimulus that meets the criteria handed down by the White House — it is both immediate and temporary,” Tracy Mullin, NRF president and chief executive officer, said in a statement.
Some economists oppose the concept of national tax holidays that are designed to put money back into the consumer’s pocket, but simultaneously drain city, state or national budgets of tax revenue.
“I don’t support them normally because they tend to cause consumers to postpone purchases until the date the holiday goes into effect,” said Charles McMillion, chief economist at MBG Information Services. “They also pirate from future retail sales.”
But Mullin claimed that sales tax holidays have “proven tremendously successful” in luring consumers into the stores and “boosting the economy in the states that have instituted them.”
The Graham measure calls for the implementation of a sales tax holiday, beginning on Nov. 23 — the day after Thanksgiving — through Dec. 2. It will include all tangible personal merchandise and big-ticket items, such as automobiles, but not food, alcoholic beverages or tobacco products.
Congress would reimburse states and localities for sales tax revenue lost during this period. Local jurisdictions that collect sales tax would be reimbursed via the states. The sales tax holiday would not be mandatory. Participation would be up to each state legislature and governor.

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