The trouble with tax-free holidays

Posted: Aug 17, 2001 12:00 AM
My daughter's still in diapers, but I'm taking her "back-to-school" shopping this week. Here in Maryland, politicians have established a tax-free, retail holiday to pander to the soccer-mom crowd. The trend was started in New York and copied in Connecticut, Florida, Iowa, Pennsylvania, South Carolina, Texas and the District of Columbia. We should take back every penny from the government that we can get. But let the buyer beware: These election-year ploys are a popular way to bribe beleaguered taxpayers without ever having to pass lasting, across-the-board tax relief. During a brief summer respite, leading liberals in some of the nation's highest-taxing areas turn into ardent Reaganite supply-siders. Maryland officials, for example, say that increased economic activity from our tax-free spree -- officials estimate up to $150 million in sales -- will more than make up for roughly $6 million in lost government revenue. Well, if it's such a fabulous idea for a few days in August, why not the rest of the year? Or why not follow the lead of Alaska, Delaware, Montana, New Hampshire and Oregon -- which have no state sales tax at all and are prospering just fine? Ask these questions and the tax-cutting converts crumble: Heavens, no. We'd have to reduce spending. Things would get out of control. Maintaining control is what these stingy little holidays are all about. Instead of giving us back our money and letting us spend it as we see fit (as the Bush federal tax rebates do), these local shopping gimmicks come with tangled strings attached: -- Maryland: In addition to legitimate school apparel under $100, scores of non-school items qualify for the exemption from the state's 5 percent sales tax. On the list: adult diapers, arm warmers, bowling shirts, bridal gowns, clerical vestments, corsets, baby diapers, fur coats, support hose and tennis skirts. The list of non-qualifying items, however, is even longer and weirder. Swim trunks are exempt, but swim goggles are not. Hand muffs are exempt, but headbands are not. Hiking boots are tax-free, but backpacks are taxed. Rented shoes and flip-flops are exempt, but not shoes with cleats. Bib overalls are OK, but not baby bibs. -- New York: In 2000, the state passed a permanent exemption from its 4 percent sales tax on clothing less than $110. Many cities eliminated their matching local sales taxes. But because of confusing regulations, the big tax grab continues. New York City found that 40 percent of stores surveyed are still collecting full sales taxes on tax-free items. Shoulder pads for dresses are exempt, but pads for athletic uniforms are not. Receiving blankets are tax-free, but not crib blankets. Caps are covered, but not hair bows. Ballet shoes qualify, but not roller skates. Can you blame the poor retailers -- who will now be hounded by tax enforcers and possibly be required to undergo "multilingual" training seminars -- for being confused? -- Texas: Vests are tax-free, unless they act as personal flotation devices. Belt buckles are taxed, unless attached to the belt. Golf shirts and golf skirts are exempt, but golf shoes and golf gloves are taxable. Sunglasses are taxed, unless they come with a prescription. -- Florida: In the Sunshine State, snowsuits are tax-free under the law. So are pens, but not highlighters or markers. Glue gets a discount, but not staples. Book bags qualify, but not briefcases. Wallets are tax-free, unless they come with a key chain. The trouble with transitory tax-free holidays is that they are token givebacks designed to maximize political gain, ensure full employment for revenue collectors, and undermine support for comprehensive tax reform and real spending cuts. Creating a few sales-tax-free days in August distracts bargain-hunting shoppers from the outrageous fact that it takes them until July 6 to pay off the total tax and regulatory burden that governments at all levels impose every year. Alas, demanding a permanent vacation from this tax oppression is about as unfashionable as last year's school clothes.