By Patrick McGrady
Special to The Dagger
Starting on Sunday, August 14, Maryland citizens are granted a week of tax-free shopping!
Well, not really.
During the 2007 regular session of the general Assembly (probably as a warm-up to the largest taxes in Maryland history– see the last two weeks posts here and here) the legislature passed a law that will require that the 7 days following the Second Sunday in August will have a week of tax-free shopping, with all kinds of strings attached.
If you buy specific items of clothing or shoes, retailers are not required to collect the sales tax of 6%. Check out the list here.
To qualify for exempt status, the products purchased have to be less than $100 per item, but you can buy as many as you would like. But there are all kinds of weird contradictions in exemptions to go along with this:
– Tuxedos and Tux Rentals are Exempt, but ties are taxable
– Lab coats are tax exempt, but hair nets taxable
– Baby clothes are exempt, but baby bibs are taxable
– “Martial Arts Attire” is exempt, but football pads are taxable
– Chef’s uniforms are exempt, but not aprons
– Tennis shoes are exempt (if under $100) but not steel toed shoes
And it goes on and on.
I’m not sure what the point of this tax exemption is, really. Is it a meant as economic stimulus?
Or am I cynical to think that this was created for Politicians to go all over the state and talk about how great this is for consumers like Comptroller and 2014 Democratic Gubernatorial Candidate Franchot has been doing?
Surely this gimmick is not meant to make the back-to-school purchases easier on folks in Maryland; textbooks, pens and pencils, paper, and backpacks are all taxable this week. It is pretty clear that this is a policy with “feel good” intentions but no real plan behind it.
Franchot and others have been making the case that this is a good opportunity for working families to get a break from the oppressive tax burden faced in Maryland. I’m not joking.
A few months after the State Delegates and Senators passed this in 2007, the Legislature and Governor raised the sales tax 20% from 5% to 6%– so maybe this was a slice of relief against the burden to come.
If a family spends $50.00 on new clothes, this gimmick will yield a “savings” of $3.00. Unless this tax holiday is paired with in-store discounts (which according the news some firms are doing) this will not stimulate sales or save a lot of money for households.
When the State starts “cutting deals” for certain weeks of the year or for specific industries or products, we all lose. Why not cut taxes on computers? Or for electric vehicles? Or provide tax cuts only for non-union employees? This reeks of central economic planning and will surely lead to a distortion of spending. Our government should not pick winners and losers unless we seek inequality under the law.
In the short term, tax breaks like this are based on poor economic planning and are bad tax policy. Consumers will plan around the tax holiday, postponing purchases until the sale, and pushing future sales forward to fit in the window. The net effect is a loss of revenue to the state with little impact on sales.
So what’s the point? If Maryland had a fair, predictable, and stable tax structure, gimmicks like this would be unnecessary. Taxes shouldn’t be something that politicians manipulate to garner votes.
Be a smart consumer. If you were planning to buy clothing, take advantage of the sale. If not, go about your regular routine and bargain shop.
Afterword: We must remember before praising our elected officials for this “great tax break” that we are giving over our money to them. They have no rights to it. I’m reminded of Samuel Adams: “If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen.”
Listen or watch the discussion with Patrick McGrady and Maynard Edwards live at 8 a.m. Wednesday on WAMD 970 AM. Or call the station to give your point of view at (410) 306-6270.