Shoppers across the country may have circled this weekend on the calendar weeks ago. The reason? Many states will roll out a “tax free holiday” which will allow consumers to make purchases tax free, in an attmept to boost spending and jump start the local economy. Some decry the move as a political gimmick, but others have lauded the decision and point to estimates (at least in Massachusetts) that the holiday will generate some $500 million in revenue.
The truth is that results have been mixed. A story posted this week in the Christian Science Monitor cites a 2009 dissertation done by the University of Michigan, which found that, “computer purchases did go up with tax holidays, but between 37 and 90 percent of the rise resulted from consumers timing purchases they would have made anyway to coincide with the tax break.”
That study also found that in the month of the holiday, state tax revenue decreased anywhere from .52 percent to 7.83 percent. So in essence, people likely would have made the purchases anyway, so the states were essentially losing out on the tax revenue, not driving impulse spending.
The question is, how will this affect the micro business community? Many small retailers and businesses are gearing up for the weekend, but the impact of the holiday on the micro (and even small) business community has still yet to be measured. Typically consumers wait to make big purchases such as TV’s and computers (usually under the $2500 threshold). Does that mean they’re going to be more likely to visit their local clothing store or antique dealer to make a purchase? Will “smaller retailers” feel the impact of the holiday?
As a micro business, how are you gearing up for the tax holiday season? Do you expect it to give a boost to your business?
Let’s discuss.
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