- The Washington Times - Thursday, August 3, 2006

The District, Maryland and Virginia for the first time will all have back-to-school sales tax holidays.

Retailers and legislators say it’s an opportunity to help working families buy necessities such as school clothes and supplies. Tax specialists say it is a highly visible, low-impact move by politicians to back feel-good concepts like families, education and children.

During Virginia’s first sales tax holiday, held today through Sunday, shoppers are exempt from the 5 percent sales tax on school supplies for $20 or less or clothing and shoes for $100 or less. The Virginia Department of Taxation has a list of eligible school supplies at tax.virginia.gov.

The District made its tax holidays in August and November permanent in 2004. This year’s holiday from the 5.75 percent fee begins tomorrow and lasts nine days.

Maryland, which has not had a tax holiday since 2001, will bring the 5 percent reprieve back this year from Aug. 23-27.

Shoppers in both Maryland and the District are exempt from the sales tax on clothing and shoes for $100 or less. The District’s holiday includes exemptions for accessories and school supplies.

“Sales tax is the most regressive of all taxes,” said D.C. Council member Carol Schwartz, at-large Republican, who started the sales tax holiday in 2001 and sponsored legislation to make it permanent in 2004. “It doesn’t matter if you’re the richest person in the world or the poorest person in the world, you pay the exact same sales tax rate. That makes it very difficult sometimes for people with limited incomes to get their children ready for school.”

Many retailers, including Best Buy and Circuit City, have rallied around the holiday by picking up the sales tax on everything, in essence extending it to all items in Virginia stores. Many other states do not allow retailers to do that.

“People are more excited about a sales tax holiday than a sale promotion that might financially be more generous,” said Jim Babb, a spokesman for Circuit City, which is opening at 7 a.m. today and tomorrow for the sale.

Tysons Corner Center is doing a back-to-school fashion show tomorrow, and Fair Oaks Mall is giving away free items, including Pepsi samples, tomorrow.

The Virginia Retail Merchants Association pushed for the holiday in the commonwealth because of the similar incentives in North Carolina, Tennessee and the District.

“If you drive down to North Carolina or drive up to D.C. during the sales tax holiday, we were flabbergasted to see the numbers of cars there from Virginia,” said Laurie Peterson Aldrich, president of the association. “That’s not only nontaxable dollars lost but also taxable dollars.”

In Virginia, the holiday is expected to cost the commonwealth $3.6 million, about .11 percent of the sales taxes it is expected to generate this year. In Maryland, it’s a $5.5 million loss, or .17 percent. In the District, the estimated cost is $1.1 million for both its August and November holidays, or .14 percent.

Tax specialists say the true benefit of a sales tax holiday has been inflated.

“It’s highly visible, but the impact of it is questionable,” said Ryan Burruss, spokesman for the Federation of Tax Administrators in the District.

Mrs. Schwartz disagrees.

“5.75 percent can add up,” she said. “If you’re going in and spending a few hundred dollars, which is easy to do when you’re shopping for school, the savings can add up.”

Apparently, it’s a hard concept to not support. The D.C. Council and Maryland legislature unanimously passed their sales-tax holiday bills. In Virginia, it passed 89-7 in the House and unanimously in the Senate.

“By tying it into back-to-school, you hit all the basics: education, children, families. Everything everyone can be behind,” Mr. Burruss said.

“Any tax cut is a good idea,” said Grover Norquist, founder of Americans for Tax Reform, which supports a flat income tax. “I see this as, you have a store that has a sale on Saturday and you wonder what prices are the rest of the year versus stores that say we don’t have sales, we have year-round low prices.”

Like most sales, this one could just prompt people to make more impulse purchases.

“It’s a goodwill gesture. It’s a PR move, but it can have a real impact on people if they choose to take advantage of it,” said Sophie Beckmann, financial planning specialist at A.G. Edwards & Sons Inc. in St. Louis. “You can really go out and save a lot of money. You’re saving, but also spending. It helps retailers and the overall economy.”

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