Tax Holiday?

Here in Massachusetts we’re preparing for a few days of mass (or Mass, take your pick) idiocy this coming weekend. In what is becoming an annual traditional, we will have a “tax holiday” on August 12-13, joining a number of states that are providing a brief window of summer shopping exempt from sales tax. Here’s what to expect during this new event:

*Perky reporters will invariably report that shoppers and merchants are “giddy” over this “Christmas in August,” and will find pedestrian marks to mouth their cute and contrived notion that consumers are buying on these days as a form of “civil disobedience.”

*Newspapers and television stations will run images of sweaty consumers crowding Best Buy, Sears, and other retail meccas.

*Our moronic (n.b. I am not commenting on his religion) Governor will hold a cheesy media event where he inspects refrigerators and flat-screen tvs, gives a wooden sales pitch, and urges individuals to buy without fear of pouring any money into state coffers (where it could be used for programs such as, say, consumer education.)

I say that if having a tax holiday is such cause for celebration, then we should honor the event in civic tradition, with a big honking parade. And all the floats should be powered by Visa, and MBNA, and Capital One, and every other member of the credit industry that is benefiting from a new excuse for individuals to buy mindlessly. At our parade, however, let’s not count on any police or fire-fighters to handle crowd control or safety precautions, since in order to compensate for fewer state-shared funds we’d need to give them all an “unpaid” holiday. (Yeah, I know that police and firefighters are paid by the municipalities not the state—yet any diminution of state funds to local education or other programs has an impact. And who pays for the salary of the state police?)

I mean, the more you think about this the less it makes sense. How much money is the state spending to promote a holiday celebrating the fact that consumers are lessening the state’s coffers? Is the state so ashamed of collecting taxes that it feels the need to make a day of amnesty a great celebration? If so, couldn’t we have some better name in the tradition of Cinco de Mayo or Boxing Day? Like Maxed-out Midsummer Madness, or Fees for Freedom Fiesta?

State officials and retail executives estimate that while the state will lose about $10 million from these two tax-free days, much of that revenue will be offset by more taxes collected from the extra gasoline sold to consumers making the pilgrimage to our state. Gee, that’s just what we need. More profits to Exxon spurred by completely unnecessary driving. The mind reels.

So in order to save 12 bucks on a new iPod, some folks in Rhode Island will be buying 10 gallons of gas at 3 bucks per gallon, spending 12 dollars for parking, and then dropping an extra double sawbuck for the mall meal. They don’t call it Christmas in August for nothin.

The thing that really kills me about this stupendously half-baked idea is the wealth it generates through transaction costs, interest charges, and more financial mischief from retailers and creditors. Folks estimate that at least half of the more than $500 million spent during the holidays will be “impulse buying.” Hmmm. How do people pay for impulse buys? Cash? I don’t think so. They use or take out new credit to pay for these goods. So for the Targets and Sears’ and other retailers making much of their profits from their credit business, this holiday will be a gift that keeps on giving. It’s a sleazy state scam like the Lottery. Only the state isn’t getting the money.

Here’s what I propose: if we really want this event to benefit individuals, then at the very least ask all creditors (the merchants and the credit card companies) not to charge any interest or fees on these purchases for the first six months. And we should take the bump in state taxes from gasoline sales those days and put that money into upgrading public transportation. And we should ask the yahoos on the hill who spent God knows how many days crafting the legislation to spend a commensurate amount chasing down the shady debt collectors recently spotlighted in The Boston Globe.

Posted by tom at August 8, 2006 10:21 AM
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