NRF Asks Obama for National Sales Tax Holidays, Retail Stimulus Effort
The National Retail Federation today (Tues.) asked President-elect Barack Obama to incorporate a series of national sales tax holidays into upcoming economic stimulus legislation as a step toward rebuilding consumer confidence.
“The situation is critical,” NRF said. “In October, consumer confidence was at its lowest level in the 41 years that records have been kept…. With consumer spending accounting for 70% of GDP, it is difficult to foresee an improvement in overall economic growth until the consumers regain their footing.”
Short-term gains from consumer spending and long-term growth from job creation are both needed to achieve economic recovery, the NRF wrote to Obama (pdf).
“To be effective, any fiscal stimulus package must be enacted with great speed. It must be substantial. And it must be sustained,” NRF wrote. “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 letter was signed by NRF Chairman Myron E. “Mike” Ullman III (Chairman and CEO, JCPenney Company), NRF First Vice Chairman Philip L. Francis (Chairman and CEO, PetSmart Inc.), NRF Second Vice Chairman Stephen I. Sadove (Chairman and CEO, Saks Incorporated) and NRF President and CEO Tracy Mullin.
Tax Holiday Details
“Retailers’ considerable experience with sales tax holidays has shown that they provide a substantial inducement for people to shop,” the letter said. “To this end, we suggest a series of three national sales tax holidays that would cover a very broad range of goods.”
According to NRF’s proposal:
- Tax holidays would be held during March, July, and October 2009, each lasting 10 days, including two weekends.
- Tax-free treatment would apply to all tangible goods subject to a state sales tax ranging from apparel and home furnishings to restaurant dining and automobiles but would exclude tobacco and alcohol.
- The federal government would reimburse the 45 states that have sales taxes for the lost revenue, and would provide the five states without a sales tax (Alaska, Delaware, Montana, New Hampshire and Oregon) with revenue approximating the sales tax reimbursement that would be received by states with similar population.
State sales tax rates range from 2.9% to 7.25% and add $236 billion a year to the amount US consumers pay for goods and services, according to the US Census Bureau. By temporarily lifting the sales tax for the three 10-day periods, NRF estimates, consumers could 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.
In addition to saving consumers money, the sales tax holidays would help support the 25 million jobs in the US retail industry, or one out of every five US workers, and millions of jobs in industries that supply retailers with merchandise and services, NRF said.
An NRF survey conducted when a national sales tax holiday was considered in 2001 found that 82% of consumers favored a tax holiday, 83% would take advantage by making purchases, and 69% would make purchases they otherwise would not have made.
Infrastructure Investments
NRF also called for infrastructure investment in roads, rails, ports, public schools, and renewable-energy projects, saying it would have a double benefit of creating jobs and repairing systems that are critical to commerce.
“We believe that significant investment in infrastructure spending will provide jobs and increase GDP at a higher rate than most other government investments, and will produce longer-term, sustained growth,” Mullin said.