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  •   Tax Takes a Holiday, Lone Star Style

    By Paul Duggan
    Washington Post Staff Writer
    Sunday, August 8, 1999; Page A3

    AUSTIN, Aug. 7 – Dorothy Alanis, with $400 in her purse, sighed. She leaned on her Ford Aerostar van in the sun-scorched parking lot of a shopping mall here and waited for the children to clamber out – seven boys and girls, five of them hers, all soon to be back in school.

    "They need everything," said Alanis. "Shorts, sneakers, socks, shirts. . . "

    So she and her sister, Melissa Alanis, 23, mother of two of the children, arrived at Barton Creek Square at 9 this morning. They locked the minivan, assembled their little platoon and moved out across the shimmering blacktop like a couple of battle-weary sergeants. "Underwear," said Dorothy Alanis, 36, wiping the sweat away. "T-shirts, jeans. . . "

    All around them in the parking lot – and all over the state on this special shopping weekend in Texas – veterans of the back-to-school buying hassle, and others willing to brave extraordinary crowds, marched toward mall entrances in what retailers say are record numbers for three days in August, the scent of an unusual bargain in the air.

    For the weekend, the tax relief that Gov. George W. Bush (R) championed in this year's state legislative session – before he launched his presidential campaign – has come true in a way that ordinary Texans can feel. The state's 6.25 percent sales tax, and local taxes that boost the rate to 8.25 percent in many places, have been suspended for three days on footwear and scores of clothing items costing less than $100. The response, say Texas retailers, has been overwhelming.

    "Nowadays you have to save any way you can," said Elizabeth Gomez, 42, slogging into Barton Creek behind the Alanis sisters. With Gomez was her son Andrew, 13, whose favorite words are "Tommy Hilfiger."

    "Me and the girls at work were talking, and it doesn't seem like you'd save much," Gomez said. "But once you start spending a lot, you really notice it."

    For retailers big and small, it's Christmas in August. From Amarillo in the panhandle to Corpus Christi on the Gulf of Mexico, from Odessa in West Texas to downtown Dallas, malls extended their hours, and merchants reported long lines of shoppers day and night.

    "It's a madhouse everywhere," said Theda Page Whitehead, spokeswoman for J.C. Penney, which has 84 stores in Texas. Her counterparts across the retail spectrum, from Wal-Mart to the high-end Foley's department store chain, gushed about the volume. "Unbelievable," said a Sears, Roebuck & Co. official.

    In Texas – one of eight states without an income tax – the sales tax is among the highest in the country, accounting for more than half the state's overall tax revenue in 1998, according to census data. By contrast, Maryland's 5 percent sales tax brought in less than a quarter of the state's total tax revenue. The same was true for Virginia's 3.5 percent sales tax, one of the nation's lowest.

    The three-day tax holiday, expected to result in about $35 million in lost revenue, was timed for the start of Texas's school year in mid-August. Lawmakers approved the tax suspension for this year and next, part of a $1.6 billion tax-relief plan for property owners, businesses and consumers, passed in May at the close of the legislature's biennial session.

    "Any day the government's not taking a dollar out of my pocket is a good day," said Anthony Kaspar, 43, herding his three sons into Austin's Highland Mall. Like thousands of other Texans, he and his wife, Julie, 39, waited for the tax holiday to outfit the boys for school.

    "I might not really feel" the saving, Kaspar said. "But it still feels good."

    Among states that levy sales taxes on clothing and footwear, Texas is the third to offer consumers a temporary break. In New York, which began scheduling sales-tax holidays in 1997, and in Florida, where the idea took hold last year, the concept has been a hit with shoppers and merchants, industry officials said.

    "It's a great thing -- particularly the first few times it's done," said Bruce Van Kleeck, a vice president of the National Retail Federation. "It gets a tremendous response. Consumers these days are value-driven. That's why the discount segment of the industry is performing so well. People today want value."

    In New York, legislators suspended the state's 4 percent sales tax for a week in January and another in September 1997 for a long list of footwear and apparel items costing less than $500. Although local jurisdictions with taxing authority were not required to follow suit, nearly all of them did, including New York City, said Ruth Burkhard, spokeswoman for the state Department of Taxation and Finance.

    The week-long tax breaks were repeated last year and in January this year. More tax-free weeks have been set for next month and January 2000. The tax holidays became so popular that lawmakers voted to eliminate the sales tax permanently, as of next March, on most clothing and footwear costing less than $110.

    Florida lawmakers authorized a similar week-long break last August, suspending the state's 6 percent sales tax on footwear and scores of clothing and related items costing $50 or less. Merchants and consumers declared the week a success and pushed legislators to expand and fine tune the concept for 1999, said Lori Elliott, spokeswoman for the Florida Retail Federation.

    She said the tax moratorium was extended to nine days, from July 31 through this weekend; the $50 limit was increased to $100; and the list of tax-exempt items was clarified and expanded.

    "All the people I've spoken with have just been absolutely wowed by sales," Elliott said. "They're talking about double-digit percentage increases" compared with the July 31-Aug. 8 period last year, when the sales tax was in force.

    "Consumers last year saved approximately $16 million [in sales taxes] statewide," said Donna O'Neal, spokeswoman for Florida's Department of Revenue. "This year the estimate is about double that amount."

    In Texas, local jurisdictions were required to suspend their sales taxes this weekend, but will be allowed to impose them during next year's state-tax holiday.

    In the meantime, merchants are thrilled.

    After the Christmas season, after the post-holiday bargain rush and spring shopping weeks, after Valentine's Day, Mother's Day and Father's Day, retail sales usually sag, until back-to-school buyers hit stores. In Texas, that annual shopping cycle has been given a jump-start.

    "Traffic's been incredible," said Mike McClanahan, manager of a Wal-Mart in Midland. The tax-free weekend got underway at 12:01 a.m. Friday, and bargain-hunters at the 24-hour store were checking their watches.

    "Kind of like the old 'I Love Lucy' show, remember?" he said. "There was some kind of sale going on, and Lucy and Viv had their noses up against the glass, waiting. There were some people here like that."


    © 1999 The Washington Post Company

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