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National Retail Federation Recommends Sales Tax Holidays
12-23-2008

The National Retail Federation (NRF), a Washington, D.C.-based trade association with about 2,200 members, has asked President-elect Barack Obama to incorporate a series of national sales tax holidays into upcoming economic stimulus legislation. The recommendation is part of plan devised by the NRF to help spur consumer spending and economic growth during a time of economic strife.

In a letter to Obama dated today, Dec. 23, NRF leaders said the economic situation is “critical.”

“Experts are forecasting a weak economy well into 2009,” NRF leaders said in the letter. “In October, consumer confidence was at its lowest level in the 41 years that records have been kept. This is due, as you know, to the disastrous combination of decreasing home values, increasing unemployment, reduced availability of credit, failures of major companies and weakness in the stock market.”

To improve the economic situation, the NRF has recommended a short-term and long-term proposal — the short-term proposal being three national sales tax holidays, and the long-term proposal being an investment in the country’s infrastructure.

“To be effective, any fiscal stimulus package must be enacted with great speed. It must be substantial. And it must be sustained,” NRF leaders said. “To accomplish this, the plan must include a longer-term investment designed to produce sustained economic growth through job creation, as well as short-term economic stimulus aimed at increasing consumer spending.”

The proposed tax holidays would be 10 days long and held in March, July and October 2009, with each holiday period covering two weekends.

The holiday would apply to all tangible goods subject to state sales tax, ranging from apparel and home furnishings to restaurant dining and automobiles. It would exclude tobacco and alcohol.

The federal government would be required to reimburse the 45 states that have sales taxes for the loss of revenue during the holiday period. For the fives states that do not have sales taxes (Alaska, Delaware, Montana, New Hampshire and Oregon), the federal government would provide them with a revenue approximate to the sales tax reimbursement states with similar populations received. It would then be left to the discretion of each of those states to allocate the proceeds of the distribution in a way that would stimulate spending, like a tax refund.

By lifting the sales tax for the three 10-day periods, the NRF estimates consumers would save nearly $20 billion. Based on the 112.4 million households in the United States, the figure would amount to almost $175 for the average family.

The NRF’s long-term stimulus proposal also calls for investment in infrastructure spending. The NRF said such an investment would produce jobs, increase the gross domestic product at a higher rate than most other government investments, and produce sustained growth. The NRF said it would also repair decaying roads, rails and ports, which the NRF said are crucial to commerce in the United States.

“In addition, infrastructure spending could make an important investment in our public schools and in the development of renewable sources,” the letter reads.

The NRF said it recommended coupling this proposal with sales tax holidays because of the long lead time before such projects can be started.

Posted December 23, 2008

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