NTF Issue Paper: Taxplan3.doc. 1-07.

NEBRASKA TAXPAYERS FOR FREEDOM ISSUE PAPER:

TAX-FREE WEEKENDS FOR NEBRASKA TAXPAYERS.

BACKGROUND. 13 states now have tax-free holidays, ranging from 2 to 9 days, during which citizens can purchase a range of consumer items without paying either state or local sales taxes. The Texas holiday is in its 7^th year. The Massachusetts holiday applies to all retail items. In Iowa, for the 7^th year, consumers can buy most clothes (not purses or backpacks) and shoes priced under $100, saving 7c on each dollar spent. The exemption covers merchandise under layaway plans and items ordered by mail order, catalog, or Internet. In 2004, shoppers saved almost $2.4 million. The Missouri tax-free holiday lasts 3 days. Exempt are computers up to $3,500 and school supplies up to $50, besides clothing items up to $100. The objective is to stimulate business for merchants. Happy retailers extend shopping hours and provide a variety of extra merchandise. Merchants plan special promotions and family events to draw shoppers.

OUR PROPOSAL. The state treasury slightly will lose sales tax revenue, yet consumers, with the money saved, will purchase more items and services. Our state economy will receive a stimulus, and taxpayers will receive deserved tax relief. The sales tax exemption permanently would apply to all goods and services for a 3-day period in mid-August, before the beginning of the public school year, and for a 2-day weekend period during the Christmas holiday season. The exemption would not apply to rented or leased items or purchases conducted by businesses or for resale. Consumers would receive the bargain on individual items, regardless of the total amount of purchases. The exemption of all items would prevent confusion and cut planning time for merchants; they should not suffer an additional paperwork burden. Passage of this legislation much in advance would allow retailers to plan accordingly ahead of time. Many retailers probably also would offer special sales and discounts during exemption days. People could purchase more expensive items that they otherwise could not afford, like furniture and computers. Money saved on taxes people could spend on necessities. Our state taxes, including sales taxes, are higher in almost every category than those in adjoining states. We now lose many sales and much revenue to neighboring states from outflow of dollars because of their gambling and lower fuel, liquor, cigarette, and sales taxes. Exemption for computer and computer accessory sales would encourage and help consumers embrace new technology. A holiday would boost state revenues because of increased purchases and the influx of shoppers from other states. These greater sales for businesses would mean higher profits and thus increased income tax revenue for Nebraska.

CONCLUSION. Only the state legislature can pass legislation to implement this economic stimulus plan. High taxers have thwarted several previous efforts. Contact your state senator immediately to sponsor or co-sponsor a bill in the 2009 legislative session in January. Use the points given above to lobby your state senator. Contact NTF by email at netaxpayers@cox.net or call (402) 551-0921 for state senator contact information.

Research, documentation, and analysis for this issue paper done by Doug Kagan, with express prior permission granted for its use by Cherry County Taxpayers, Dawes County Taxpayers, Citizens for Local Control, and other groups in the Tax Freedom Network. 1-07. C