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Sunday, August 4, 2013

Sales tax holiday fails as local retailer protection tool

Posted By on Sun, Aug 4, 2013 at 3:35 PM


The annual "back-to-school sales tax holiday" ends at 11:59 p.m. today

Not too late for another reminder about how it falls short on policy, consumer protection and local business protection.

The Tax Foundation has laid out the case against such holidays on policy grounds. They don't promote economic activity; they time shift purchases.

A popular argument was the need for Arkansas to be competitive with neighboring states to protect local retailers. That argument always held little merit except in border areas. Anybody driving from Little Rock to Memphis, at a cost of 50 cents a mile, to save on sales tax needs their head examined. Even in El Dorado, home of sponsor Matthew Sheppard, you needed only to drive the 17 miles to Junction City to use up the value of the roughly $6 saved on $100 worth of clothing purchases.

Retailers will tell you they like the holidays because 1) once they have people in the stores the customers buy a bunch of other stuff not covered by the tax exemption and 2) they can manipulate prices just as they do every day. Walmart, for example, doesn't price EVERY article lower than the competition. I was reminded of that the other day when I paid more for a light bulb than I paid at an independent hardware store nearby.

I got another reminder today of the lack of vision in the parochial reasons for supporting the tax break. Two actually. Both Lands End and Office Depot sent me e-mails reminding me that the tax break applied to items purchased from them on-line, on top of existing sale prices and free shipping. I didn't check Amazon, currently not paying sales taxes in Arkansas. I'd guess that careful shoppers can beat sales tax holiday net prices many days with just rigorous comparison shopping.

Love the tax break if you must, but I still need some help understanding why Lt. Gov. Mark Darr tweeted that he intended to stay up until midnight Friday so he could be first in the door at Walmart to collect his sales tax savings.

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