After calling it “popular” but not necessarily “prudent,” Gov. Deval Patrick on Monday signed a bill creating a two-day sales tax holiday later this month that will give shoppers a brief respite from the state’s 6.25 percent sales tax.
Patrick, who was preparing to host lawmakers for a summer cookout at his second home in the Berkshires on Monday night, signed the politically popular bill whisked to his desk last Friday by the House and Senate before the start of the unofficial August recess.
His signature gives retailers almost two full weeks to prepare for the shopping blitz, which usually includes advertising campaigns centered around the holiday to lure shoppers into stores for purchases they have been waiting to make or “impulse buys” motivated by the desire to avoid taxes.
Under the bill, sales tax will not be collected on Aug. 13 and Aug. 14 on purchases up to $2,500. The holiday will be the seventh in the last eight years after lawmakers opted not to approve the sales tax break in 2009 at the height of the financial crisis.
Estimated by the Department of Revenue to save shoppers roughly $20 million in sales taxes over that weekend, the tax break was passed over the objections of some House and Senate Democrats who argued the money would be better spent on restoring cuts to programs that saw a decrease in funding under the fiscal 2012 budget plan.
Opponents said the holiday simply shifts purchases that would already be made to a single weekend in August, adding staffing and overtime costs on employers and jeopardizing revenue needed for other services important to communities.
Supporters, however, argued that the two-day holiday gave taxpayers a much needed break, enabling families to save money on back-to-school shopping and generating higher taxes in other areas for the state, including income taxes from the increased number of employees who will be asked by retailers to work that weekend.
Advocates said consumers will spend more throughout the economy that weekend, paying gas taxes and meals taxes while they are out shopping and creating momentum for the economy while recovering some sales that might have been lost to the Internet or New Hampshire.
The House passed the bill 123-23, while the Senate voted 28-9 in favor.
“With folks across the Commonwealth continuing to struggle through the economic downturn, the sales tax holiday will provide relief to consumers while supporting local merchants,” Speaker Robert DeLeo said in a statement after the House voted. “The House has once again voted to stimulate local businesses which keep jobs in Massachusetts.”
Retailers Association President Jon Hurst applauded the Legislature passage of the sales tax holiday last week, calling it an “important economic stimulus” for consumers and small businesses.
“Many lower income families do not have the same ability of higher income shoppers to go on the Internet and to use a credit card, or drive to New Hampshire in order to avoid the sales tax,” Hurst said. “The Sales Tax Holiday therefore makes our sales tax a bit less regressive.”
Patrick’s support for the holiday was not in question, despite stating that he would sign the bill “frankly, not because it is particularly fiscally prudent, but because it is popular.” Senate Ways and Means Chairman Stephen Brewer echoed the governor’s sentiments later in the week telling the News Service the bill was “better politics than policy,” but still an expense the state can afford.
