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Some say tax free shopping week is weak

It’s that time of year again — devastating humidity, last-hurrah crab feasts — and, for the third consecutive year, the state’s tax-free shopping week. From Sunday through Aug.18, shoes and apparel priced less than $100 will be exempt from Maryland’s 6 percent sales tax.

Adrianne Dixon, left, and her mother Jeannette Dixon, examine the price tag on a shirt for sale at the Target on Reisterstown Road in Pikesville while shopping Wednesday.

Officials believe the tax holiday is an incentive to lure shoppers back into stores and generate more foot traffic earlier than usual, according to Comptroller Peter Franchot, who added that consumer spending makes up 70 percent of the Maryland economy.

“This tax-free week is a very welcome shot in the arm for both big retail and smaller retail because the economy is very slow and unemployment is climbing,” Franchot said. “Tax-free Shop Maryland Week is very timely in that, based on the last two years, we find that it jumpstarts the fall shopping season earlier than normal.”

But that assessment might be too optimistic, according to many shoppers browsing in Target on Reisterstown Road in Pikesville Wednesday, who said the program hardly influences their buying habits.

Sarah Don, who lives in Pikesville and has three sons, said the program doesn’t offer a large enough incentive.

“I would assume it doesn’t get people to the store if they wouldn’t go otherwise,” she said. “I don’t even think, if they’re already at the store, they’d say ‘Oh, I’ll get one more shirt.’ At least, for me it wouldn’t.”

Franchot said his office estimates Shop Maryland Week will result in a 9 to10 percent increase in retail sales and that the state will lose about $10 million in sales tax revenue.

“My experts tell me we make that [loss] up pretty quickly because there’s increased shopping in the weeks following tax-free week,” he said. “I know that sounds a little counterintuitive, but they say once you wake up the consumer, it has a spillover effect.”

Franchot admitted there’s no quantifiable way to demonstrate how the increased retail sales make up for the loss of tax revenue, but he said one of the program’s goals is simply to please local residents.

“In addition to making sense economically, it’s also very popular with Maryland citizens,” he said. “People plan around it.”

Marylin Sanders, a manager at the Pikesville Target, said customers do frequently ask about the tax holiday in the preceding weeks, and that “it’s a benefit to any retailer.”

“It’s a great way to get the parents in, and you can definitely notice a foot traffic difference,” she said, adding that Target consistently sees increased sales at summer’s end due to the chain’s own specials.

Promotions for tax-free week often target back-to-school shoppers, and while the program can’t remedy kids’ end-of-summer woes, state officials said they hope it will ease the financial burden on parents of buying new clothes for fall.

But the focus on school shopping has also bred uncertainty among consumers. One shopper browsing through Target Wednesday said she thought the program didn’t apply to her because her children weren’t in school.

Franchot said such confusion is one reason why he believes the state should broaden the scope of Shop Maryland Week by waiving the sales tax on school supplies in addition to apparel.

“Right now there’s a lot of confusion with the public about what is and what isn’t exempt,” Franchot said. “I think it’s appropriate, based on the program’s success and popularity, to include more items and make it easier for consumers [to afford back-to-school shopping.]”

Between now and when the regular legislative session kicks off in January, Franchot said his office will submit a formal request for the body to consider expanding the list of tax-exempt items.

Last August, when the recession dominated headlines and public discourse, consumers seemed more eager about the tax holiday. This year, however, some shoppers said their excitement has waned.

Adrianne Dixon, who was shopping for her son in Target with her mother, Jeanette, said she knew about tax-free week but was skeptical it would make a difference.

“I think overall we’ve lost a lot of confidence in the state,” said Jeanette Dixon, who lives in Northwest Baltimore. “Now, if the city wanted to get people to shop downtown, they could maybe let people park in those areas for free every now and then.”

Franchot, however, said he’s confident the program still hits home with consumers.

“I think because the economy is still so uncertain … we’re pretty sure that this year is going to track last year’s experience,” he said.

The tax holiday dates back to a special session of the General Assembly in 2007, where the legislature determined Shop Maryland Week would be held every year starting the second Sunday in August. Lawmakers also established a tax-free weekend in February on purchases of Energy Star appliances.

In addition to Maryland, almost two dozen other states have tax-free shopping periods, including neighboring Virginia.