Group Seeks Sales Tax Holidays To Spur Economy

The National Retail Federation has urged Obama transition officials to devote some of the stimulus package to the creation of tax holidays next year. The group wants three, 10-day periods in which there will be no state sales tax.

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ROBERT SIEGEL, host:

From NPR News, this is All Things Considered. I'm Robert Siegel. The holiday shopping season is ending and the sales figures do not impress. Retail sales for last week, usually one of the busiest through the year, were down six-tenths of one percent compared with last year according to one survey. So retailers are looking to next year, and they are asking for gifts for themselves. The National Retail Federation wants the incoming Obama administration to include sales tax holidays, as part of an economic stimulus package. NPR's Yuki Noguchi has more.

YUKI NOGUCHI: Rochelle Bernstein has some personal retail research left to do.

Ms. ROCHELLE BERNSTEIN (Vice President, National Retail Federation): So, I have to tell you I still have some Christmas shopping to do this afternoon, so the question will be how - whether it's crowded as I might expect it to be or whether it's not quite that crowded.

NOGUCHI: Bernstein is vice president and tax counselor for the National Retail Federation, and some of her members are seeing major declines in spending. And this makes her feel two ways about the prospect of no lines.

Ms. BERNSTEIN: Well, it's a good thing if you are the one shopping. I certainly enjoy a situation that is not as crowded, it is not a good thing for the retailers.

NOGUCHI: Retailers haven't seen much of a good thing of late. Despite many early sales, spending is down, and the longer term indicators are also poor. Unemployment is on the rise leaving people feeling uncertain about their jobs. Gross domestic product is down and the housing and automotive sectors remain sick. And this is why Bernstein's group got in line, along with many other industries, to give the federal government its wish list.

Ms. BERNSTEIN: We think the economy cannot recover without participation from the consumers.

NOGUCHI: The Retail Federation is asking for a tax holiday, specifically three ten-day periods next year, when there will be no state sales tax. The tax break proposal would cover everything from apparel to autos, and furniture to dining out, every tangible good basically, except alcohol and tobacco. The federal government would reimburse the unpaid taxes to the states, including sending money to the five states that don't charge a sales tax. Seventeen states already do tax holidays from time to time. Bernstein says their proposal would cost about $20 billion in federal funds and it could prevent some stores from closing or laying off more employees.

Ms. BERNSTEIN: It's really amazing that consumers are so attracted to a sales tax holiday. We hear that there's a lot more traffic in the stores during a sales tax holiday than when a retailer may advertise a special promotion, even though the promotion may be 15 percent off or 20 percent off and, you know, a typical sales tax maybe five or six percent.

NOGUCHI: Earlier this week, Vice President-elect Joe Biden discussed plans for the stimulus package, but did not mention retail.

(Soundbite of speech)

VICE PRESIDENT-ELECT JOE BIDEN: This plan will be focused on making investments in health care, education, and energy among other areas, and will be directed a critical investments in our nation's roads and our bridges.

NOGUCHI: The Retail Federation's Bernstein says the things Biden mentioned are important, but won't solve the immediate problems in retail.

Ms. BERNSTEIN: Investment in infrastructure spending can provide some long-term economic growth, and that will help sustain the economy, but that takes a long lead time.

NOGUCHI: Mike Niemira is chief economist for the International Council of Shopping Centers and he is skeptical of the tax holiday proposal.

Mr. MIKE NIEMIRA (Vice President, Chief Economist, International Council of Shopping Centers): What research has shown in the past is that those tax holidays don't necessarily generate a lot of new spending.

NOGUCHI: Niemira says it won't amount to a long-term gain for retailers.

Mr. NIEMIRA: What happens is consumers just shift their buying from this day to that day.

NOGUCHI: He says what the retail industry really needs from the government are more measures to help free up credit for commercial real estate, and in the longer term what would help most, he says, is a recovery in the housing and auto sectors, which would get consumer spending more for the longer term. Yuki Noguchi, NPR News.

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Little Comfort, Joy In Economic Numbers

Christmas Eve brought good tidings but little comfort or joy as many Americans struggled with higher unemployment and shrinking incomes.

The number of U.S. workers who filed unemployment claims for the first time hit a 26-year high last week, with more companies laying off workers in an effort to cut costs during the yearlong recession.

The Labor Department reported that new claims for unemployment benefits climbed to a seasonally adjusted 586,000 for the week ending Dec. 20 - an increase of 30,000.

In recent weeks, manufacturing, financial and service companies have swung the ax to cut costs. This month alone, Bank of America Corp. announced it was eliminating 30,000 to 35,000 jobs over the next three years, while Dow Chemical Co. - the country's largest chemical maker - announced it was closing 20 facilities and laying off 11,000 employees and contract workers.

3M Co., Anheuser-Busch InBev, Danaher Corp. and others also slashed their workforces in the fourth quarter.

So far, nearly 2 million workers have lost their jobs in 2008, propelling the jobless rate upward to 6.7 percent.

In addition, the Commerce Department reported that Americans' incomes fell 0.2 percent in November. Economists attributed the decline, in part, to increased unemployment.

But one government report did bring a bit of holiday cheer. The Commerce Department reported Wednesday that consumer spending in November rose slightly when adjusted for inflation, inching up 0.6 percent; the unadjusted rate of consumer spending declined 0.6 percent.

Economists said plummeting gas prices and deep discounts at holiday sales were responsible for the rebound in inflation-adjusted spending. The boost marked the first increase in real consumption since May.

"The purchasing power of the dollar went up in November, and that's what fueled the increase in spending," said economist Brian Bethune of Global Insights.

Investors took little comfort in the unadjusted rate of consumer spending and the poor jobs numbers. Oil dropped 9 percent Wednesday, with U.S. crude settling at $35.35 — a 9.31 percent decline.

After five straight sessions of closing down, stocks were up slightly on the shortened trading day. The Dow Jones industrial average rose 48.99 or 0.58 percent to 8,468.48. The Standard & Poor's 500 index futures rose 4.99, or 0.58 percent, to 868.15, and the Nasdaq composite index rose 3.36, or 0.22 percent, to 1,524.90.

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