Why is there no tax-free weekend in Kentucky?

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Margarita Cambest
Kentucky New Era

Once a year, a third of U.S. states give shoppers a free pass on paying the sales tax on back-to-school purchases.
Shoppers respond in droves. Mall parking lots fill. Cash registers beep tirelessly. It’s like Black Friday for back-to-school and clothing purchases, just not in Kentucky.
Shoppers in Tennessee, Missouri and Virginia will shop tax-free this weekend, but the Bluegrass state has never offered a break on back-to-school sales tax, and the possibility looks bleak.
According to the National Retail Federation’s 2013 Back-to-School Survey, families with school-age children spent an average of $634.78 on apparel, shoes and supplies last school year.
Children in Christian County return to public school on Aug. 5. If the more than 8,700 public school children split back-to-school shopping costs with at least one sibling, that’s almost $3 million in sales. Many of those dollars go to Hoptown’s southern neighbor.
Although the measure was brought up in both the state House and Senate, State Sen. Whitney Westerfield said data showing the loss of sales tax revenue is all it takes to stop it from being further discussed.
“I don’t know what the reluctance is to support it,” Westerfield said. “I know every time (Tennessee) has one, all of us shop on that day. Everybody is down there taking advantage of it. It’s a huge boom for local businesses (in Clarksville) and even businesses that don’t fall under the tax-free exemption.”
Supporters of the policy cite a “halo effect” generated by back-to-school shopping. From the morning Starbucks stop to lunch or an unplanned haircut, retailers who do not offer back-to-school items feel the traffic too.
Westerfield said, “If Christian County had a tax-free holiday how many people are going to stop for lunch at Logan’s or O’Charley’s or East Meets West?”
Peg Hays, whose family owns and runs Herb Hays Furniture downtown said she would be for a tax-free holiday in the state because of the potential business it could bring.
“It would be a great way for Kentucky to earn business. All the dollars that leave Kentucky to go take advantage of a tax-free weekend, there would be an ability to stop that outflow. It would be huge. It at least ought to be studied. They ought to be able to tell us why we can’t have that.”
Hays described it as a ‘build it and they will come philosophy’. If shoppers leave their houses to shop for clothes they may decide to buy furniture.
Tennessee adopted its sales tax holiday in 2006. The state’s department of revenue estimates Tennesseans save $8 to $10 million in tax savings on clothing purchases of $100 or less, school supplies of $100 or less and computers under $1,500 each year. But when shoppers save states lose, says the Tax Foundation, an independent, nonpartisan organization which researches tax policy.
Michigan first offered a sales tax break on automobiles in 1980, but the tax-free holiday as we know it was introduced in 1997 when New York pushed to keep its back-to-school shoppers from traveling to bordering states with lower sales tax rates.
Twenty-seven states have tested the holiday since then, but only 16 continue to do so. States that do give up millions in lost revenue, say officials at Tax Foundation. Its researchers argue that parents who have to buy their children glue sticks and markers anyway are not buying more but earlier. Sales are not increased but shifted.
Instead of Kentucky’s own tax-free holiday, the Christian County Chamber of Commerce is pushing a shop local message in hopes that residents will keep their dollars in-state.
“We have a low (sales) tax here anyway, but if you can save 10 percent, you know, that’s quite a bit,” spokeswoman Penny Fletcher said of Clarksville’s almost 10 percent sales tax. “We’re lucky that we don’t have to pay 10 percent, but it would be good to have a tax-free weekend.”
“What we can do here in Christian County to move this to the state level is to see if Kentucky can have a tax-free weekend just like Tennessee,” Fletcher said. “We want people saying, ‘I want my money to stay here because that will benefit me.’”
“It’s another place where we have an opportunity to distinguish ourselves from border counties,” he said. “A lot of folks from Hopkinsville go to other counties to spend money. It would be nice if they could spend that money in Hoptown, or Bowling Green or somewhere in Kentucky locally.”