Sales Tax Holiday Blooms Shopping Season

Local shopping centers are gearing up for coming annual “Back to School” sales tax holiday a weekend as big as during the holiday shopping season.

The Missouri state sales tax of 4.225 percent will be dropped on clothes, computers and school supplies starting at midnight Aug. 6 and lasting through Aug. 8. Many municipalities also are dropping their local sales taxes for the weekend, letting customers buy qualified items tax-free.

For seven days in August, Maryland shoppers can purchase certain clothing items costing less than $100 without paying the state's 6 percent sales tax.

The Mississippi sales tax holiday weekend is July 30 and 31st. It's back to school shopping made easier in Mississippi, but retailers hope it's not just school shoppers cashing in. Clothing and shoes will be exempt from the state's sales tax; retailers say it's a time for customers to buy.

A 2007 law established Aug. 8-16 of this year as a "sales-tax holiday" because legislators thought that by now the state would have a budget surplus and could afford the revenue loss. But tough economic times have lasted longer than anyone expected, to the point where what the state is really doing now is giving up money it doesn't have.

The tax holiday is expected to cost the state treasury about $9 million in lost revenues. That's enough to provide 1,000 families with emergency housing assistance, or state college scholarships for 4,500 students. And it comes as the state is about to grapple with how to fill an expected $1.5 billion revenue hole resulting from lower revenues brought on by the recession.

Job Creation Tax Credit Causes and Effect

Whether the job creation tax credit signed in law last March is having any effect, Treasury Department officials reported. Though it took some time for a clear picture to develop, we're pleased to learn that the tax incentives the state grants companies to create jobs.

The Treasury study compared responses from the Labor Department's Current Population Survey the basis for the government's labor force data and the unemployment rate for three consecutive months to May. This tax program, part of the Hire Act of 2010, is intended to encourage businesses to add workers who have been out of a job for at least 60 days by making it cheaper to employ them.

Usually, the federal government collects Social Security payroll taxes on salaries, amounting to 12.4 percent of every employee’s wages (up to $106,800; any wages over that amount are not subject to Social Security taxes). Half of this payroll tax, or 6.2 percent, comes from the employee, and the other half, or another 6.2 percent, is collected from the employer. For the average wage of the 4.5 million workers cited by Treasury, employers could see up to $3,500 in tax savings for each, however that smaller firms may not be as aware of the credit as larger firms with larger human resources departments.

Under the Hire Act, businesses that hire the long-term unemployed do not have to pay this 6.2 percent tax on each worker for the remainder of 2010. Additionally, if these new employees stay on for a year, the employer gets another tax credit of $1,000. The challenge, of course, is making sure that the tax credit actually induces hiring, rather than just being claimed for people who would have gotten jobs anyway.

The Treasury Department is now trying to assess how well the program is working, and is finding it a challenging task. The Obama administration is trying to extend the act, which expires at the end of the year, in the hopes that it will still be around by the time word actually spreads.

Long Beach Tax on Medical Marijuana

Long Beach is joining the cities of Berkeley and Sacramento in considering a tax on medical marijuana collectives to help close their budget gaps. Proposed ballot measure would levy a 5% tax on medical pot collectives and another tax of 10% if recreational pot is legalized. But it would require a special election costing up to $450,000.

When Long Beach voters join other Californians in November to decide whether to legalize recreational marijuana, they may also get the chance to decide if it should be taxed. The City Council took a step toward putting a marijuana tax measure on the ballot that would levy a 15 percent tax bumped up from a proposed 10 percent on the recreational drug and a 5 percent tax on medical marijuana. City officials don't know how revenue the tax would raise, but they're looking for every penny to help eliminate an estimated $18.5 million budget deficit in the next fiscal year.

The Los Angeles suburb with a population of almost 500,000 scheduled a public hearing on the drug levy for Aug. 3. If the council later approves the wording, a ballot initiative establishing a 5 percent tax on the city’s 35 dispensaries could go to voters in November, according to Lori Ann Farrell, Long Beach’s director of financial management.

Long Beach joins California cities including the state capital, Sacramento, weighing marijuana taxes to bridge falling revenue from the worst recession since the 1930s. The nation’s largest state by population saw an explosion in the number of marijuana dispensaries after voters approved a 1996 referendum legalizing pot for medicinal use.

Discussion of the tax comes as the state prepares to vote on Proposition 19, a referendum on the November ballot. If approved, the measure would make it legal for anyone age 21 or older to possess one ounce or less of marijuana, and allow local governments to regulate and tax sales. The medical marijuana tax is modeled after one by the City of Oakland, which expects to collect $1 million a year in revenue from its four authorized dispensaries.