A Better Pitch (Opinion)

Another week, another self-serving pitch by retailers.

Recently we considered the Arkansas Oil Marketers Association’s endorsement of a state lottery proposal and concluded that the benefits convenience store operators would reap would come at the expense of low-income Arkansans and other businesses.

Now we consider the “sales tax holiday” pitched by Dillard’s Inc. and favored by Wal-Mart and the Arkansas Grocers & Retail Merchants Association. Our conclusion: It may be self-serving, but it would also serve the interest of Arkansans.

The permanent repeal of the remaining 3 percent state sales tax on groceries — a stated goal of Gov. Mike Beebe — would be infinitely better than a few hours of sales tax holiday once a year. But until the state can afford a hit of $125 million a year, the holiday would be infinitely better than nothing.

Every state that borders Arkansas except Mississippi has a few days set aside each year during which basic consumer necessities are not subject to the state sales tax. During those sales tax holidays, Arkansas retailers in border cities lose business to other states and local governments lose tax dollars.

If Arkansas were to adopt the holiday as outlined in draft legislation by state Rep. Clark Hall, D-Marvell, moderately priced clothing, school supplies and computer equipment would be exempt from the state’s 6 percent sales tax for three days each August. State officials estimate that the holiday would cost the state about $5 million in sales taxes, an unknown portion of which would be offset by keeping back-to-school shoppers in Arkansas.

Imagine: A sales tax holiday might actually pull a few border-state residents into Arkansas to spend money.

Since the holiday would apply equally to all retailers selling eligible merchandise, the only retailers who would be adversely affected are those in neighboring states. The lottery proposal, by contrast, would benefit convenience stores in Arkansas at the expense of border state competitors and of every Arkansas retailer that didn’t sell lottery tickets.

Here’s an even sharper contrast: The sales tax holiday would shift money from government and into the pockets of consumers instead of the other way around. And the odds of actually getting something for their money during a sales tax holiday are 1:1.

Yes, Dillard’s and Wal-Mart could expect a few additional dollars to be spent inside their doors.

But when you consider that Wal-Mart’s profit margin is about 3 percent (and Dillard’s, sadly, even slimmer), you must conclude that consumers would profit far more.