Sales tax break no net loss or gain to state; But it gives pols something upbeat to brag about to voters

Friday, August 06, 2010

I appreciate a good holiday as well as the next fellow, but I'm still trying to decide what to make of Illinois' new Sales Tax Holiday, which starts Friday.

In the first place, they say the Sales Tax Holiday will last 10 days. In my book, that makes it a sales tax vacation.

A good holiday should never last longer than a three-day weekend. That's why Christmas has become so exhausting. It goes on for weeks.

Second, a good holiday should have a clear purpose, like Pulaski Day.

Everybody understands Pulaski Day is intended as an excuse for public employees and schoolchildren in Illinois to get an extra day off in early March and to placate the once influential Polish voting bloc in Chicago.

By contrast, the public is very confused about the purpose of the Sales Tax Holiday. They seem to think it is intended to stimulate spending and help families save money on back-to-school items by eliminating the state's 5 percent sales tax during the 10-day period.

OK, maybe that is the purpose, along with giving state politicians something upbeat to tell the voters come election time.

But the confusing part is that a lot of people seem to think the Sales Tax Holiday applies only to school supplies and kids' clothing.

NOT JUST SCHOOL SUPPLIES, KIDS' CLOTHES

In actuality, it applies to nearly any clothing item under $100, whether that clothing is to be worn by a first-grader or a grandparent.

How do I know a lot of people are confused about this? Because my wife didn't understand, and she knows everything about shopping.

And because the Sales Tax Holiday applies to clothes for adults who don't plan to go back to school, that brings up the problem of me needing new socks. I'm down to a one week's supply, with new holes appearing daily.

You say you don't care that I need new socks. Well, you should.

If I buy my socks during the Sales Tax Holiday, the State of Illinois doesn't get its 5 percent sales tax on my purchase.

As you may have heard, the State of Illinois is broke. It needs my 5 percent sales tax -- and yours and yours and yours.

Sooner or later, I'm going to get around to buying my new socks, and I don't begrudge the state its sales tax. But I'm not sure I can wait two weeks until after the holiday.

Some of you may be thinking that the state won't lose much money in sales tax on my socks, which is true, although I am tempted to buy another pair of those expensive Pantherella socks, because they last so much longer.

What you're failing to take into account, however, is that when I buy new socks, I usually break down and buy new underwear at the same time. It only make sense, right guys? That way, you don't have to make a second shopping trip in the same year.

And at that point if I'm parting with all that money, I might just finally break down and buy a new lightweight jacket like I've been threatening since spring, something to replace what my kids call the "hobo jacket." By then, I'll have cost the state maybe $5 in sales tax.

ECONOMISTS SAY HOLIDAY IS NONSENSE

Keep in mind there's no net gain or loss to the economy one way or another. Like I say, I'm going to make these purchases at some point. Does it really make any sense to beat the government out of 5 percent when what I've really been holding out for is the chance to beat some store out of 30 to 50 percent?

The Illinois Department of Revenue has published a detailed list of which clothing items will and will not qualify for the exemption. Most of it is just common sense, although it must have been a close call in determining that aprons and athletic supporters will be tax exempt during the holiday while work gloves will not.

Economists are pretty much agreed that when it comes to economic stimulation, such sales tax holidays are a bunch of nonsense that only cause consumers to change the timing of their spending, not increase it.

But retailers like them, which is why more than a third of the states will have a sales tax holiday this year, with Illinois only being the latest to succumb. Illinois, which can't pay its bills, is hoping to forgo $40 million to $60 million in sales tax revenue during the holiday period.

If you do go "holiday" shopping -- and I can understand why you would -- keep in mind that any local sales taxes will still apply. Those amount to 4.75 percent in Chicago.

If you hold off a while, though, please let me know when you see a good sale on socks.