CNN/Money One for credit card only hard offer form at $9.95 One for risk-free form at $14.95 w/ $9.95 upsell  
News > Jobs & Economy
Will shoppers take the tax-free bait?
Some observers say New York's tax break on clothes, shoes may not be that big a deal to consumers.
August 31, 2004: 2:55 PM EDT
By Parija Bhatnagar, CNN/Money staff writer

NEW YORK (CNN/Money) - New York is rolling out the red carpet all over again this week, but it's not for the VIPs from out of town.

The state's sales tax-free week gets underway Tuesday, and the hope is that a little more saving for consumers translates into a little more spending at the retail registers.

But some industry watchers say discount-savvy shoppers may not necessarily take the bait.

The tax-free period, which runs from Aug. 31 through Monday Sept. 6, also covers the important Labor Day holiday shopping weekend -- a nice little bonus for the bargain hungry.

A few specialty apparel chains, such as teen retailer Aeropostale (ARO: Research, Estimates), anticipating a boost in store traffic in New York locations are offering additional discounts during the week on popular items such as jeans and polo shirts.

Overall, 12 states held a tax-free shopping week this year, with a majority timing the event to coincide with the back-to-school buying period, which has grown to become the second most important sales period for the industry after Christmas.

"The tax-free week is intended to boost consumer spending and act as a stimulus to the economy," said J. Craig Shearman, vice president of government affairs with the National Retail Federation. "But the immediate benefit is obviously to retailers."

Said Shearman, "For consumers, the impact is more psychological in nature rather than actual."

The reason for that, explains Shearman, is that a tax break of 8 percent doesn't seem like a lot compared to the big 50 to 75 percent discounts that consumers have become accustomed to receiving.

"If there were no sales tax-free holidays, would the situation be any different for consumers?" said Michael Niemira, chief economist and director of research with the International Council of Shopping Centers (ICSC). "We asked consumers that question in a survey, and 70 percent said a tax-free week didn't affect their shopping."

"A tax-free week is more of a social statement on the part of states. It's great for publicity and the advertising. Retailers are not dumb. They know they can leverage the opportunity to drive traffic to their stores and clear merchandise," said Niemira.

"For consumers, it's more of an opportunity to shift when they spend their money and not how much they spend," he said.

New York's week-long exemption, the state's 10th such tax holiday since New York first implemented the concept back in 1997, gives consumers a break on the 8.625 percent sales tax on clothing and shoes priced under $110.

E.J. McMahon, senior fellow with the Manhattan Institute for Policy Research, a New York-based nonprofit think tank that researches tax, welfare, education and legal issues, said he thinks New York's tax-free week will have minimal effect on consumers but should benefit merchants.

"It's not as if people save their shopping money and head to stores only when the tax-free week hits," said McMahon. "Now if retailers can plan 20 percent discounts this week, they can actually piggyback on those discounts with state-subsidized taxes during this period."  Top of page

  More on NEWS
Anheuser-Busch orders 800 hydrogen-powered semi trucks from Tesla rival Nikola
H&M and Zara ditch mohair wool after animal cruelty expose
US and China kick off talks to avoid a trade war
Gas prices are up 31% from last Memorial Day. Here's why
SoulCycle isn't going public -- for now
Visa suspends Morgan Freeman campaign after accusations of inappropriate behavior

graphic graphic