Retailers sell sizzle, not steak. That fact has become so commonplace in the retail community, from used car lots to grocery stores to front yard lemonade stands, that it's more shocking to find a product rounded to $5 than one marked $4.99.
Stores don't trumpet full retail prices; they have sales and limited-time offers or "buy one, get one free" deals. Prices fluctuate, and consumers react to those mark-ups and mark-downs — or not, depending on how motivated they are by modest differences in price. It's all part of the retail game, and consumers hardly give it a second thought.
That's why it's a bit amusing — and frankly, a little surprising — to hear "experts" heap on criticism of Maryland for the state's choice to conduct a sales tax holiday next week. Maryland has gotten it from both sides: Either it's too costly to government, or the savings are too meager for taxpayers.
The Tax Foundation last month published a "special report" decrying Maryland and 15 other states planning to suspend the state sales tax for a limited time in 2011 for failing to promote growth and "distorting" consumer decisions.
"Political gimmicks like sales tax holidays distract policymakers and taxpayers from genuine, permanent tax relief," experts from the conservative-leaning tax reform group observed in the report. "If a state must offer a "holiday" from its tax system, it is a sign that the state's tax system is uncompetitive."
Really? By that reasoning, big box retail stores are uncompetitive 24/7, because nary an hour goes by without a mark down on something at the local Best Buy, Dick's or Michael's. Apparently, they've been hiding behind a failed price structure.
And as far as distractions go, we don't really recall a great deal of debate about the sales tax holiday in Annapolis. Rest assured, it probably won't get much mention when the General Assembly holds a special session to discuss tax reform and political redistricting in October.
What Maryland does offer is a one-week, tax-free "sale" beginning at 12:01 a.m. on the second Sunday in August on qualifying apparel and footwear valued at $100 or less. The deal ends at midnight on Saturday, Aug. 20.
Does this represent tax reform? Absolutely not. Will it bankrupt the state treasury? It is expected to reduce tax revenues for the week by $15 million, but that should not put Maryland and its $4.2 billion in annual sales tax collections out of business.
Is it a gimmick? Well now, there you have us because yes, it is. But if gimmicks are good enough for the nation's most successful retail operators, why aren't they good enough for states that choose to invest modestly and generate consumer interest on behalf of stores?
Next week's sales tax holiday on apparel (timed with back-to-school sales) isn't even Maryland's only foray into discounting. Next February, the state will offer a tax-free weekend on the purchase of fuel-efficient Energy Star products including washers, dryers, hot water heaters, furnaces, air conditioners and the like.
Again, that probably won't be the primary driver of household appliance purchases in 2012; nor will it force the state into insolvency. But sometimes, a sale is just a sale — and if it prompts consumers to loosen their wallets and spend dollars they might not have otherwise spent (or even spend them earlier), this distressed economy could certainly use the help.