By Patrick McGrady
Special to The Dagger
Starting on Sunday, August 14, Maryland citizens are granted a week of tax-free shopping!
Well, not really.
During the 2007 regular session of the general Assembly (probably as a warm-up to the largest taxes in Maryland history– see the last two weeks posts here and here) the legislature passed a law that will require that the 7 days following the Second Sunday in August will have a week of tax-free shopping, with all kinds of strings attached.
If you buy specific items of clothing or shoes, retailers are not required to collect the sales tax of 6%. Check out the list here.
To qualify for exempt status, the products purchased have to be less than $100 per item, but you can buy as many as you would like. But there are all kinds of weird contradictions in exemptions to go along with this:
– Tuxedos and Tux Rentals are Exempt, but ties are taxable
– Lab coats are tax exempt, but hair nets taxable
– Baby clothes are exempt, but baby bibs are taxable
– “Martial Arts Attire” is exempt, but football pads are taxable
– Chef’s uniforms are exempt, but not aprons
– Tennis shoes are exempt (if under $100) but not steel toed shoes
And it goes on and on.
I’m not sure what the point of this tax exemption is, really. Is it a meant as economic stimulus?
Or am I cynical to think that this was created for Politicians to go all over the state and talk about how great this is for consumers like Comptroller and 2014 Democratic Gubernatorial Candidate Franchot has been doing?
See here: http://www.baltimoresun.com/business/bal-md-franchot-tax-free-pg,0,905168.photogallery
Surely this gimmick is not meant to make the back-to-school purchases easier on folks in Maryland; textbooks, pens and pencils, paper, and backpacks are all taxable this week. It is pretty clear that this is a policy with “feel good” intentions but no real plan behind it.
Franchot and others have been making the case that this is a good opportunity for working families to get a break from the oppressive tax burden faced in Maryland. I’m not joking.
A few months after the State Delegates and Senators passed this in 2007, the Legislature and Governor raised the sales tax 20% from 5% to 6%– so maybe this was a slice of relief against the burden to come.
If a family spends $50.00 on new clothes, this gimmick will yield a “savings” of $3.00. Unless this tax holiday is paired with in-store discounts (which according the news some firms are doing) this will not stimulate sales or save a lot of money for households.
When the State starts “cutting deals” for certain weeks of the year or for specific industries or products, we all lose. Why not cut taxes on computers? Or for electric vehicles? Or provide tax cuts only for non-union employees? This reeks of central economic planning and will surely lead to a distortion of spending. Our government should not pick winners and losers unless we seek inequality under the law.
In the short term, tax breaks like this are based on poor economic planning and are bad tax policy. Consumers will plan around the tax holiday, postponing purchases until the sale, and pushing future sales forward to fit in the window. The net effect is a loss of revenue to the state with little impact on sales.
So what’s the point? If Maryland had a fair, predictable, and stable tax structure, gimmicks like this would be unnecessary. Taxes shouldn’t be something that politicians manipulate to garner votes.
Be a smart consumer. If you were planning to buy clothing, take advantage of the sale. If not, go about your regular routine and bargain shop.
Afterword: We must remember before praising our elected officials for this “great tax break” that we are giving over our money to them. They have no rights to it. I’m reminded of Samuel Adams: “If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen.”
Listen or watch the discussion with Patrick McGrady and Maynard Edwards live at 8 a.m. Wednesday on WAMD 970 AM. Or call the station to give your point of view at (410) 306-6270.
internet shopping
delaware is always tax free
also PA VA and WVA has tax free shopping i am sure and better deals than md
so bite it gov o and the legislator
I think that Mr. McGrady needs to talk less and say more. His constant railings against anything and everything leads me to think he is just throwing mud against the wall and hoping something sticks. When he ran for a delegate seat in the last election I voted for him because he seemed like an energetic young man with passion for the causes he championed rather than someone who wanted the position because of the implied power that came with it. However, more and more Mr. McGrady comes across as blustery as a summer thunderstorm with no real direction other than being able to claim to be anti-establishment.
Just because you have the ability to have your voice heard constantly (courtesy of the Dagger) doesn’t mean it’s in your best interests to do so. I have lost the details of your arguments as they have blurred together into one single loud whine.
I appreciate this criticism. While writing this piece, I had similar thoughts internally, it is easy to provide criticisms, but harder to provide solutions. Future pieces will go in different directions.
Again, thanks for the kind criticism. I take it to heart.
I find this article taking me back to the story about the boy who cried wolf. Sooner or later the spark just isn’t there anymore. In my opinion, a pragmatic fiscally conservative approach to state government spending and revenues is a good way to go. A serious reduction of spending(not investment)and some moderate tax reform would be a good place to start. Investment in and tax reform for new small businesses is vital to Maryland’s economic sustainability. Yes, there is a difference between good politics and good government. However, in this article, I felt I was left with neither.
All you Marylanders have to do is come across the line to PA. NO sales tax on clothing anytime. As a former Marylander living in the Shrewsbury area, we see more Maryland license plates here sometimes than we do PA. The Walmart parking lot is always filled with Maryland cars. The politicians must think the people are stupid. Let them at their own peril.
How did that millionaire’s tax work out for you?
I’m gladd you moved there now do us a favor and stay there, don’t come here and take jobs from those of us trying to live in MD.
Oh, my dear Sheeple, they mostly all work in Maryland but live elsewhere. The have grown tired of Maryland taking everything it can get. I salute their intelligence and creativity. We who stay here and put up with it are the dumb ones.
And, Cathy, the Maryland millionaire tax worked great for the surrounding states where the formerly Maryland millionaires now live but unfortunately not for Maryland where they formerly lived. And formerly paid taxes. I guess Martin would describe it as a “regional win”.
Tut, tut, Alex. The governor thought we didn’t catch on to that one.
Only a career politician could come up with all the contridictions for a tax free week. I agree with some others that shopping tax free in Del. & Pa. & the internet is the way to go. I don’t mind my tax money going to the general good but why should I have to pay for illegals, people that have more kids than they can afford, dopers, etc. I think a 10% across the board reduction in state spending would help solve the problem.
They would cut that 10% from snow, police, schools, etc. never from where it should be.
Unsurprising that the same crowds complaining about the end to the bridge tolls tax breaks now admit that they consistently shop tax free in Delaware. Clearly time to end the loopholes on these bridge tolls for undeserving tax cheats.
I can see why many with no stake in the toll increase can fail to understand the opposition. Remember, the commuters didn’t set the rates. The MdTA did. Now that they find themselves strapped for cash they look to their string of ATM’s and propose a 900% increase on Hatem commuters. This is a clear indicator of their inability (or more likely unwillingness) to plan ahead. Stepped increases over the years would have garnered little or no attention. My biggest hang up is the bogus “administrative” fee they put into play AFTER getting tens of thousands of EZ-Pass customers signed up. There is little or no difference between EZ and a key card system – and it probably goes straight into a bonus fund for upper management and the board. I know many people that have purchased decals that don’t commute and who will, instead of paying the new fees, simply forgo trips to Cecil unless they need to travel somewhere beyond. If the plan is to increase revenue while hurting businesses and further alienating and isolating Cecil County then this should do nicely.
ANONYMOUS, You never seem to get it. You don’t have to pay the toll to get to Delaware or Pennsylvania. Get a good GPS and it will take you right there with no tolls. It’s a game, ANONYMOUS. Maryland is going to do everything it can to keep raising taxes and fees so they can spend more. I and other smart people are going to do everything we can legally do to avoid it. Repeat, legally. In the end I might move to one of the many places where I can pay much less because the have their fiscal house in order. Until then I’ll be here daily correcting all of your lack of facts.
I wonder if the tax free Delaware crowd files out their sales tax forms for the goods they bring back into the state?
I hope not.
Why does it have to be so complicated?
I’m wondering with all these problems that Patrick is pointing out on the State level, if he has any solutions to propose. And before he says cut taxes, I want to also see exactly what he would cut.
Where would he start cuts,not what would he cut should be the questions.
The solution? Get the tax and spend Democrats out of office and replace them with fiscal Conservatives.
Are there any fiscal conservatives left? Most seem to be social conservatives who want to spend just as much money as the liberals, but on different priorities.
Ron Paul?
@Concerned Teacher- As a fiscal conservative, I see minimal difference in either political party. Ron Paul has made some good points. I was hoping for an Independent or third party challenger who would expose the hypocrisy of both political parties. From their posts and submissions, quite a few Republicans here are CINO’s.
Not only that, but something else most people dont know. If a business buys things tax free in Delaware, they can be audited by the state of Maryland. Anything they buy in Delaware that goes towards their business is subject to Maryland sales tax. Can you blame any business for going to a more business friendly state like Virginia? Yes, the tax and throw money away Democrats need to be out of office.
Actually, individual residents of Maryland who buy in sales-tax-free states like Delaware or online are supposed to remit the sales tax to Maryland.
I didnt know that individuals are supposed to do it too. If someone pays state sales tax in another state why should they have to pay a state sales tax again to Md? To me that is double taxation that this state has no business to get involved with. I dont think they can require an out of state company to collect sales tax and give it to Maryland if you are buying something on the internet. If the company refuses, this state cant do anything about it. Do people pay state tax on goods they bring in to the airport from Europe? This state has got to change or it will go broke. What jobs will be created here? More and more people will be retired.
From the Maryland Taxes website Consumer Use Tax Return For Purchases Form –
“We’re all familiar with Maryland’s sales tax, but far fewer people know about the use tax and when they must pay it. In fact, every state with a sales tax also has a use tax. The use tax is imposed on items you paid less than 6% sales tax or 9% tax on alcoholic beverages when you purchased them and did not pay the sales tax at time of purchase. You are required to pay the difference between the actual tax charged and the applicable Maryland tax rate as use tax.”
Well gee then maybe if I go to a state that charges more than the Md sales tax, when I get the item back home Md can reimburse me for the difference. I guess the point is the state cant do anything about internet shopping or people who drive across the border with goods purchased elsewhere. The post office or the state police arent going to help much with these situations. However, the state does send random auditors to businesses who have to show where they bought items from that they use for their business. I suppose a business has to keep records if they buy a new copy machine, etc. I dont know because I dont own a business. The easiest targets for the auditors are businesses like builders who cross into Delaware to buy lumber, etc. They have to show records of where they got their materials and pay the tax if it is from Delaware.
@Clay – It is unlikely that the average taxpayer will get caught not paying MD sales/use on their big screen TV bought in Delaware are pretty slim, however wealthy art collectors who buy at out-of-state auctions millions in art pieces or wine and put them in their home in MD is another story.
Regarding businesses with clean and accurate books not remitting MD sales/use tax they are very likely to get caught in an audit especially for technology purchases.
Businesses with two sets of books are unlikely to accurately report purchases in a sales/use tax audit and are hard to catch.
Clay if you buy a car in Pennsylvania you pay tax there. When you register it here in Maryland you pay tax again!
If you buy a car in another state with a rate lower than Maryland you pay the differential.
Maryland residents typically do not pay tax when buying in another state, but pay sales tax when they register the car in Maryland.
True that: check out last week’s post here:
http://www.daggerpress.com/2011/08/08/mcgrady-special-session-convening-this-october-in-annapolis-likely-to-include-increased-sales-and-use-tax/