Cape officials to consider tax holiday

The Cape Girardeau City Council will consider giving shoppers an early Christmas present.

Council members said they will likely decide today whether to suspend the city's sales taxes on specified back-to-school items from Aug. 13 through Aug. 15 as allowed under state law.

A law enacted last year establishes the one-time sales tax holiday. The sales tax exemption applies to the purchase of clothing, school supplies and personal computers.

State sales tax, amounting to 4.225 cents on the dollar, won't be charged on such items during the sales tax holiday. But under the new state law, cities and counties can choose not to suspend their own local sales taxes.

So far, 106 cities and 55 counties have rejected the tax holiday, but none in the immediate area, according to the Missouri Department of Revenue.

The debate locally comes as Cape Girardeau is seeing healthy sales tax growth. The city's April sales tax check was up 18 percent from the April 2003 check.

City finance director John Richbourg said the February, March and April sales tax checks were all up over last year's checks for the same period. It's the first time the city has seen three consecutive months of sales tax growth since the December 2000 and January and February 2001 checks, he said.

"At least there is a reason to be a little bit optimistic," he said. The April check reflects sales made in February, said Richbourg, who admitted he was surprised by the size of the increase in the April check.

The city of Cape Girardeau levies 2 cents of sales taxes on every dollar in purchases.

To opt out of the sales tax holiday, the council must adopt an ordinance by June 21 so it will take effect by the July 9 deadline, city manager Doug Leslie said.

State lawmakers and the Missouri Chamber of Commerce see the tax holiday as a way to alleviate the tax burden on working families as well as jump-start local retail businesses. Critics see it as more of a marketing gimmick that could mean tax revenue "losses" to local governments.

But the Missouri Chamber of Commerce estimates that the sales tax holiday would generate a net gain for Cape Girardeau city government of over $6,000 from increased retail sales for merchandise not covered by the tax holiday.

The Missouri chamber estimates that, statewide, increased sales of non-exempt items will more than offset the loss of sales taxes on back-to-school merchandise.

The state chamber estimates an overall sales tax gain of more than $335,000 for state government and more than $793,000 for city and county governments.

The Cape Girardeau chamber board hasn't taken an official position on the issue, but chamber president John Mehner said some local retailers have told him they favor the tax holiday as a way to drum up business.

Support from mall

Westfield Shoppingtown West Park officials urged the city council in a letter last week to suspend collection of city sales taxes for the second weekend in August.

"As a commercial entity, generating over $83 million in annual sales, we are thrilled at the prospect to offer area residents -- including those in bordering states -- an extraordinary incentive to spend those important back-to-school dollars in Cape Girardeau instead of shopping elsewhere," mall manager Brandon Ivey and senior marketing director Joyce Hunter wrote.

Councilmen Charlie Herbst and Matt Hopkins are solidly behind the sales tax holiday. They believe the city will reap more sales tax revenue because shoppers will end up buying other merchandise and services that aren't covered by the tax holiday.

"I think the amount we are giving up is not as significant as the potential for increased sales," Herbst said.

Hopkins said the tax holiday could help market Cape Girardeau to shoppers. "I think we ought to try to promote our area," he said.

Council members Evelyn Boardman and Marcia Ritter said Friday they were still undecided about the sales tax holiday, but expected to make up their minds by tonight.

Mayor Jay Knudtson and Councilman Jay Purcell couldn't be reached for comment Friday.

Councilman Hugh White said he is leaning toward voting for the city to participate in the sales tax holiday because of the "good will" it would generate for the community.

But White said he isn't convinced that the loss of taxes on back-to-school items would be completely offset by increased sales of other merchandise and services.

Richbourg, the finance director, worries that the tax holiday only will cause shoppers to postpone purchases until the second weekend in August rather than increase their overall spending.

"Most people only have a finite amount of money they can spend," he said.

mbliss@semissourian.com

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