Crist backs tax holiday for sales of school gear

Analysts project the move could cost the state treasury as much as $44 million in another tight budget year.

Published: Tuesday, January 12, 2010 at 6:01 a.m.
Last Modified: Monday, January 11, 2010 at 11:12 p.m.

TALLAHASSEE - Heading into another difficult budget year, Gov. Charlie Crist and legislative leaders said Monday that they will support a back-to-school sales tax break this year, even though it could cost the state treasury as much as $44 million.

With a new economic study from Florida retailers showing the tax break boosts overall sales and employment, Crist said the program - which has been shelved for the last two years because of budget difficulties - has proven successful in the past.

"I can't think of a better way to try to help stimulate the economy than by reducing taxes and by restoring the sales tax holiday," Crist said.

Lawmakers have been reluctant to embrace the tax break in recent years because of its impact on the state budget. Analysts projected an 11-day tax break would have resulted in loss of $44 million in sales tax collections last year.

But a new economic study - paid for by the Florida Retail Foundation - shows if a tax break had been in effect last year it would have increased sales by 8 percent during the month of the holiday.

Additionally, it would have increased overall state and local tax collections by $118 million based on the assumption that consumers going to the stores to buy the school items would make other taxable purchases, according to the study by the Washington Economics Group.

The study also said the tax break would result in the equivalent of 22,000 new jobs - although many of those would be in the form of extra working hours for existing staff and temporary help.

Rick McAllister, president of the Florida Retail Federation, said the study confirms what retailers have long believed: the sales tax holiday boosts their businesses.

"There's no question about it there is a stimulus effect," McAllister said. "There is some sort of psychological effect that when people get out shopping they buy other things."

Under the bills filed by Sen. Mike Fasano, R-New Port Richey, and Rep. David Rivera, R-Miami, the state would have a 10-day sales tax holiday in August, with the sales tax lifted on school clothing valued at less than $100 per item and on school supplies valued at $10 or less per item.

In the past few years, the House has backed the school tax break, but it has run into resistance in the Senate. Fasano said he believes the legislation will be successful this year.

"It helps the families, especially those who have children that are ready to go back to school," Fasano said. "This will have a huge impact."

The announcement came as lawmakers returned to Tallahassee for a series of meetings this week to prepare for their annual 60-day session that begins in March.

Even though state tax collections have stabilized, lawmakers are expecting another difficult budget year as demand for state services, such as Medicaid, are rising faster than revenue is expected to grow.

Lawmakers also will have to prepare for the end of federal stimulus funding, which bolstered this year's budget and prevented deep cuts to health care and education programs. The funds will taper off quickly in the next few years.

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