The Consumer Electronics Association (CEA) has thrown its support behind a Senate bill that would suspend the collection of state sales tax on most consumer goods purchased between Nov. 23 and Dec. 2.
The bipartisan proposal, spearheaded by the National Retail Federation (NRF) and introduced by Senators Patty Murray, D-Wash., Olympia Snowe, R-Maine, Joseph Lieberman, D-Conn., and Rick Santorum, R-Pa., could purportedly save consumers as much as $6.5 billion in taxes.
Proponents of the measure, which include the U.S. Chamber of Commerce and other trade groups, believe the tax incentive could boost consumer spending to some $100 billion during the 10-day moratorium. Backers say the short-term infusion would provide additional stimulus for the ailing economy while giving consumers some extra holiday cheer during a challenging time for the country.
The tax holiday would begin the day after Thanksgiving, or "Black Friday," the unofficial start of the holiday shopping season.
The Murray bill — officially the Sales Tax Holiday Act of 2001 — would also mandate the federal government to reimburse state and local governments for the sales tax revenue lost during the period, and would allow each state legislature and governor to decide whether or not to participate.
"This form of tax relief guarantees immediate consumer spending and provides an effective and needed boost to the American economy," said CEA president/CEO Gary Shapiro. "Polls indicate, and past experiences prove, that the consumer will spend in order to take advantage of this tax relief."
Indeed, CEA says that tax holidays dramatically increased consumer spending in the eight states that have implemented them on clothing, footwear, school supplies and computers. For the latter, temporary tax holidays in Pennsylvania and South Carolina in 2000 and 2001 led to a 60 percent to 80 percent increase in PC sales statewide.
The Murray bill would cover "all tangible personal property," including big-ticket items such as automobiles, but would exclude food, alcoholic beverages and tobacco products.
"This bill offers economic stimulus that meets the criteria handed down by the White House — it is both immediate and temporary," said NRF president/CEO Tracy Mullin. "It will give our economy a boost when it needs it most: right now, not years from now."
But opponents argue that the plan would require states to audit retailers in order to apply for their federal reimbursements. The added administrative costs and expected delays in receiving their sales tax subsidies could be an undue burden to states already beset by budget shortfalls.
Congressional appropriations committees will likely address the bill, along with a similar proposal in the House.