Retail sales. Words that demand action and instill fear. To borrow from Wilma Flintstone and Betty Rubble, “CHARGE IT!” is a true double-edged sword, satisfying desires while creating debt.
Taxes. We hate them. Unfortunately, society cannot survive without them. We hate paying property taxes and the 7.55 percent Columbia sales tax tagged on to most purchases. Yet the services we receive in return, including trash removal, snow removal, filling potholes and police and fire protection, are usually worth every penny.
Here, in the middle of Middle America, retail sales equate to government fiscal prosperity. Columbia, Boone County and the state live, in no small measure, by the revenues collected from sales taxes. The burden falls to the consumer with taxes generated while feeding and clothing our families, buying furniture, sporting equipment and those personal eccentricities as fashion demands. The aardvark and the faux-zebra-hide couch you have been eyeing for the last three months generates sales tax dollars so the government can do what the government does.
Economists differ on the fairness of the sales tax. However, most agree that as the economic bubble starts to deflate, sales will suffer, reducing tax revenue with one exception – the essentials of everyday life. The cost of feeding and clothing a family differs little whether the family of four earns $25,000 or $50,000 annually. However, families in the lower economic brackets spend a larger proportion of their monthly check for the same essentials. This is especially true each August as we prepare for the new school year.
With this knowledge of fiscal burden, the state provides a three-day tax holiday and a long list of exempt items to ease the financial pain. A wise decision by those under the dome in Jefferson City.
However, speaking to the shop owners and mangers at the mall, it appears that last weekend’s three-day tax holiday did little to encourage more shopping. Why? The relief was not perceived as big enough to have a benefit. Shoppers did not see an advantage because Columbia and Boone County decided not to participate in this wonderful program. This was wrong and the city and county need to take a lesson from retail marketing – the loss leader.
A loss leader is a product or service sold at a deep discount, sometimes at a loss, to attract customers. The intent of this strategy is get people in the door not only to buy the loss leader item, but also to buy other products not discounted. Consumers believe they are saving money, though they usually spend more than anticipated. This is good for business and for government.
Because the city and county decided not to participate in the 2007 tax holiday, consumers perceived that this “special” weekend wasn’t that special and stayed home. Taxable items and impulse purchases were not made. Retailers, possibly at the harm of business, did not collect additional anticipated revenues. The city and county collected fewer tax dollars. Meanwhile, the consumer retains a perpetual sour taste of local government for not participating in this wise and fair program. The citizens revolt and a bloodless coup topples the city ... Oh ...
I am sorry, I have taken the slippery slope a bit too far.
However, a revolt may be in the works. As we move closer to elections for City Council members and county officials, the citizens will remember that incumbents did not participate in the tax holiday. Their votes will reflect financial discontent.
Now, let’s say Columbia and Boone County participate in this wonderful program in 2008, using the tax holiday as a loss leader. Consumers will come out of hiding, spending more money. Business will prosper, nonexempt items will be purchased, taxes will be collected and government coffers will fill. Roads will be patched, garbage collected, citizens will feel safer and will rejoice knowing that their children will have clothes and supplies for the new school year. In November 2008, they will vote with their wallets for those who gave them a bit of relief.
Viva la Revolution!
David Rosman is a business and political communications consultant, professional speaker and instructor at Columbia College. He welcomes your comments at ProfDave1011@netscape.net.