Sales-tax PR

For the past two years, Missourians have enjoyed a state sales-tax holiday over one weekend when most families are purchasing school supplies and clothing. During the holiday, the state did not collect sales tax on those items, but not all items were exempt. For the most part, shoppers took advantage of the sales-tax relief in large numbers, as has been the experience in other states with similar tax holidays.

Cities and counties also collect sales tax. In Cape Girardeau and Cape Girardeau County, sales-tax revenue is the largest source of government funding. But Cape Girardeau, Jackson and the county joined the tax holiday rather than opt out, as provided by the Missouri Legislature when it authorized the idea in 2004.

One of the sales pitches at the time was that the tax holiday would provide an economic spark to retail sales, resulting in either a revenue-neutral result or even an increase in sale-tax revenue during the holiday. This was based on the fact that shoppers for back-to-school items tend make other purchases that aren't exempt while they are shopping.

It is disappointing to learn that the county and both Cape Girardeau and Jackson experienced losses in sales-tax revenue during the holidays of the past two years. Statewide, the holiday has cost cities $10.7 million in revenue, according to the Missouri Municipal League. As a result, Cape Girardeau has already taken action to opt out of this year's holiday, and Jackson and the county are likely to do the same thing.

Even if the cities and the county don't participate, shoppers will still enjoy a major tax savings, because the state sales tax won't be collected on eligible items during the holiday.

Based on the amount of revenue lost by Cape Girardeau, some shoppers who have enjoyed the holiday in the past may be wondering if opting out is worth any negative public-relations impact. The city says its sales-tax revenue was cut $58,000 in 2004 and $30,000 last year during the holiday. In the current fiscal year, the city expects to take in more than $8.3 million in sales-tax revenue.

Cape Girardeau has sound reasons for opting out of the tax holiday, but many taxpayers would no doubt rather see the city give a little instead of taking.