Washington needs a permanent "tax holiday"

By Jason Mercier, Evergreen Freedom Foundation

With Senator Patty Murray’s introduction of S.1643 (Sales Tax Holiday Act of 2001), we would like to welcome the left-of-center Democrats with open arms in their budding conversion to the tried-and-true principles of the free market and supply-side economics.

Senator Murray’s bill would create a “tax holiday” at the start of the Christmas shopping season, eliminating sales tax for a few days. State governments will, however, be reimbursed by the federal government for the lost revenue (meaning what taxpayers are allowed to keep in one pocket will be taken out of the other). Murray explains the necessity of this “tax holiday” by stating, “Two-thirds of our economy depends on consumer spending. . . . Consumer confidence is everything. This gives people a reason to go out and kick-start the economy and get something out of it. . . . This is my kick-the-bad-mood bill. I’m going shopping.”

Perhaps even more beneficial to the citizens of Washington than the U.S. Senator’s new understanding of supply-side economics is that of some of the state’s local Democratic leaders.

Regarding Senator Murray’s bill, State Senate Majority Leader Sid Snyder has unequivocally stated, “I think it would help consumer spending, and that’s what’s going to get us out of this economic decline.”

Governor Locke has even gone on record saying he’d call a special session of the legislature to enact the bill locally (granted the federal government reimburse Washington).

It looks like the Democrats have officially come out of the closet to implicitly support a “supply-side” model for growing our economy. The “tax holiday” bill essentially acknowledges that high taxes are an impediment to strong consumer confidence and increased discretionary spending (the two most critical aspects of a healthy economy).

By lowering, or in this case temporarily eliminating, taxes consumers will have more money to spend, which in turn will stimulate our economy. The more the economy grows, the more jobs are created. This ultimately increases the tax base, generating more revenue for government than was originally being collected through the higher tax rates. Voila! Supply-side economics at work.

Recognizing the pitfalls of high taxation and its effect on our economy, a question still arises for lawmakers: Since lower taxes will increase spending and spur the economy, why grant consumers only a “holiday?” Shouldn’t we be striving to permanently stimulate the economy and improve the purchasing power of consumers (seeing how two-thirds of our economy is driven by consumer spending)?

The “tax holiday” proposed will only be in effect from November 23rd to December 2nd, if enacted. This temporary relief is a less effective measure to provide for the long term recovery of our state’s economy than permanent tax relief. Restricting the dates of tax relief means a drop-off in spending will occur until the effective dates, serving to further hurt our already anemic economy. And why wouldn’t consumer confidence falter once again after this “tax holiday” expires?

Now that many Democrat leaders have taken the bold step to come out of the supply-side closet, we challenge our state leaders to embrace permanent tax reductions so more can be done in the short and long term to recover our economic potential. Adoption of these supply-side tax measures will boost consumer confidence by allowing taxpayers the ability to spend more of their own hard-earned money.

Let’s really allow consumers to “kick-the-bad-mood” and do some serious long-term shopping!

Jason Mercier is Deputy Communications Director for the Olympia-based Evergreen Freedom Foundation. He can be reached at (360) 956-3482 or jmercier@effwa.org.

Contact: Jason Mercier, Deputy Communications Director, (360) 956-3482

Evergreen Freedom Foundation P.O. Box 552, Olympia, WA 98507 Phone: (360) 956-3482, Fax: (360) 352-1874 Email: effwa@effwa.org