Holiday from taxes

The Missouri Legislature is considering a bill that would permit another sales-tax holiday later this year when families are purchasing back-to-school supplies. The legislature is even contemplating making the holiday a permanent annual fixture and making it mandatory instead of giving cities and counties the opportunity to opt out.

Statewide calculations based on Department of Revenue data show last August's three-day tax holiday was a success on two counts: First, it gave Missouri shoppers a tax break on such items as computers and school clothing and supplies. Many retailers combined the tax break with special sales, giving consumers even more of a bargain. Second, the tax holiday did not lower overall revenue while producing revenue gains in many areas.

(Cape Girardeau's sales-tax revenue took a dip last August but was up for the third quarter. The Missouri Municipal League, which opposes the sales-tax holiday, says the Missouri Chamber of Commerce and Industry's glowing review is "an absurdity" but provides no revenue figures to support its claim. The Department of Revenue's own analysis was "inconclusive.")

But the state chamber's interpretation of the tax holiday's impact is borne out by Department of Revenue figures. City sales-tax collections across the state were higher in the third quarter of 2004 than 2003, and cities participating in the tax holiday had, as a whole, bigger increases in revenue than cities that opted out.

More than that, the tax holiday attracted more customers for sales of items that weren't tax-exempt. Eating and drinking establishments across Missouri experienced a 7.5 percent increase in sales during the third quarter over 2003.

These findings are similar to those of other states that have had tax holidays. Texas has offered similar tax breaks for years and is considering twice-a-year holidays rather than just one weekend a year. Other states have carefully watched as their neighbors lured shoppers during tax-holiday weekends. Oklahoma is considering its own tax holiday to keep Sooner dollars from winding up in Texas and Missouri cash registers.

Giving taxpayers a break for a limited time once a year is worth it. If Missouri continues to have sales-tax holidays, the data from the next few years will show, once again, how cutting taxes spurs the economy and produces more revenue for government.