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Massachusetts Tax Holiday

Monday, August 15, 2005  |  posted by Hugh Hewitt

This is a revealing story: Massachusetts suspends its sales tax for a weekend, and the retailers experience the greatest sales weekend of the year –with the Christmas season weekends included.

There are many lessons in this bit of news. The first is, obviously, that people respond to pricing, and do so instantly. The second is that sales taxes are particularly of interest to consumers, and that governments would be well served to think supply-side with regards to sales tax levels.

There is also a potential downside: Given that Massachusetts has done this two years in a row, wouldn’t the average consumer contemplating a major purchase simply put it off until such time as the next amnesty rolls around? Though cars and items greater than $2,500 are exempt from the program –which must make the car dealers wonder why they are second class citizens on retail row– saving up to $125 on a fridge and a dryer etc is an incentive to be a patient consumer.

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