Holiday is S.C.’s way of returning money

By JOHN O’CONNOR

johnoconnor@thestate.com

Exceptions

South Carolina residents will save an estimated $16 million this weekend when they buy flat-screen televisions, CDs and DVDs and whatever version of Elmo is flying off the shelves, thanks in part to government bureaucracy.

With more than a billion-dollar budget surplus this year, Gov. Mark Sanford and lawmakers had to determine the best way to return money to taxpayers. They considered income tax refund checks and suspending the gasoline tax before finally deciding to lift the state sales tax on two of the Christmas season’s biggest shopping days.

The result? That 30-gigabyte iPod is going to cost $15 less on Friday and Saturday.

“It’s a clean way to return money to the taxpayers without the bureaucratic intervention of writing a $50 check,” said state Sen. Jim Ritchie, R-Spartanburg.

The tax break is the only one of its kind in the country, according to the Federation of Tax Administrators in Washington, D.C.

Federation spokesman Ryan Burruss said it is unclear how well sales tax holidays provide tax relief.

“It might not be the most effective way,” Burruss said. “It’s something that’s very much a public relations thing. It’s marginal the effect it has.”

A March study by Texas State University found most sales tax holidays benefit retailers more than they save shoppers.

Lawmakers said the holiday was easier than issuing refunds, which cost money to prepare the checks. Residents also would have to report the refund to the federal government.

While many states, including South Carolina, have selected weekends where goods are tax free, most states restrict the savings to certain categories — such as school supplies or clothing — or to a maximum price.

Shoppers should enjoy tax-free shopping while it lasts, because the post-Thanksgiving cut is for 2006 only.

Ritchie said he hopes the 5 percent break will spur more buying, but making it permanent would cause shoppers to hold off on big purchases.

“If it is a big success, that’s wonderful,” the senator said. “But, if people anticipate it, then it’s self-defeating.”

Reach O’Connor at (803) 771-8358.