Christmas: Never Good Enough

Another Christmas season has passed, leaving us again with various articles about how this season wasn't as good for retailers as expected. As I was reading an article about this year's retail shortcomings, I had a sense of deja-vu. Luckily, I know how to do searches on the Internet, and found that yes, I had seen stories about weak Christmas retail seasons before. Let's have a look:

2007

Despite furious, last-minute shopping and heavy discounting, holiday retail sales largely fell short of industry expectations. Target Corp. (TGT), the No. 2 U.S. discount retailer, warned December sales might actually decline, helping to send retailers' shares down.

- CNN Money, 12/26/07

2006

Rush at End, but Holiday Sales Fall Short, -The New York Times, 12/26/06

2005

Retailers Find Little To Cheer -The New York Times, 1/6/06. This article says, "The nation's merchants, trotting out deep discounts before Christmas, lured enough last-minute buyers to deliver a decent, if unspectacular, sales gain of 3.2 percent in December."

A Solid but Not Spectacular Finish for Holiday Spending -The New York Times, 12/29/05. Says the article: " the International Council of Shopping Centers found that sales at 69 chain stores rose 3.9 percent from 2004. The group's chief economist called the performance 'soft.'"

2004

Retail in Review: More Bah than Sis-Boom -The New York Times, 12/28/04. Says the gray lady: "as customers crammed stores the day after Christmas, waving their gift cards and seeking the latest markdowns, analysts were there, too - watching. They offered their latest judgment of the Christmas shopping season yesterday: good, but not great."

2003

Results Mixed, Stores Await A Final Burst Of Shopping - The New York Times, 12/26/03. "Retailers are hoping for good news [for day after Christmas shopping] because this holiday season has been disappointing to many. Although most analysts expect sales at stores over all to be 3 percent to 6 percent higher than last year's dismal holiday numbers, in September retailers were gleefully predicting double-digit growth."

2002

GROWTH IN SALES FOR HOLIDAY PERIOD IS LOWEST IN YEARS -The New York Times, 12/27/02. "After examining sales figures from the last frenzied hours before Christmas, experts yesterday declared this year's holiday season the worst in many years."

2001

Late Shopping Gives Retailers A Slight Boost -The New York Times, 12/27/01. "A surge of last-minute shopping may have given the nation's retailers and the economy a small boost, according to several reports on holiday sales released yesterday. The 11th-hour sales gains will not add much to retailers' profits because most of the increases were bought with dizzying price cuts like 70 percent off gold and diamond jewelry at Kmart and 75 percent off sweaters at Neiman Marcus."

TECHNOLOGY; A Bright Spot in a Bleak Holiday Retailing Season -The New York Times, 12/19/01. "In the worst year in recent memory for most retailers, there appears to be one small bright spot: the Internet."

2000

Sales in Holiday Season Rose, Just Barely, Over Last Year's -The New York Times, 12/27/00. "Despite widespread markdowns and a burst of last-minute buying, this year's holiday shopping season is shaping up as among the worst in a decade, industry analysts said yesterday."

1997

Diary -The New York Times, 12/28/97. "A sparkling economy failed to deliver the snappy holiday season that retailers were counting on. Analysts and merchants estimated that sales were up a scant 2 to 3 percent from December of last year. This was the third lackluster Christmas season in a row, despite the sterling economy and the wealth-generating gains of the stock market."

1996

Holiday Retail Refrain: Better Than '95 but Not Good Enough, -The New York times, 12/25/96. "As surprise led to surprise and the season faded to a close yesterday, sales appeared to have been stronger than in last year's dismal Christmas shopping season. But they were expected to fall short of the levels many people in the industry had hoped for, retailers and retail experts said yesterday."

1995

Retailers Call Sales in December Worst Since '90-'91 Recession, -The New York Times. 1/5/96. "In the culmination of a dismal year for retailers that may well lead to a further industry shakeout in the next few months, the nation's merchants reported the worst December sales figures yesterday since the 1990-91 recession."

So anyway, it looks like 1998 and 1999 were good, but every other year since 1995 has had some sort of negative spin put on Christmas sales. It seems as if retailers have expectations that are just a bit high.

The Great Pumpkin Tax

Recently, Iowa became the brunt of many jokes when it attempted to implement a sales tax on pumpkins. In Iowa, groceries are exempt from sales tax, but the Iowa government decided that most people used pumpkins for decorations and not for food. However, some specific variety of pumpkins used for pies was exempt from the tax, and you could also fill out a form if you were going to eat a pumpkin and not carve it. Seriously.

What's the real problem here? It's that the Iowa government has arbitrarily decided to tax one class of good but not another. If it had simply decided to tax everything at the same rate, this issue would never have come up. Many states exempt certain items from sales tax: in Connecticut, all groceries and any article of clothing under $50 are exempt from sales tax.

I'd rather have everything taxed, but then have the rate lower. Right now, if one class of good is taxed but another isn't, the people buying the taxed good are in effect subsidizing those who buy the untaxed good. Sure, everyone buys groceries, but not everyone spends the same ratio on groceries and taxed items. And please don't talk about helping the poor. There are many more efficient ways of helping the poor than not having a tax on groceries but having a tax on gasoline or having a tax on furniture or having a tax on cars.

When you tax people or items differently, you create many distortions. This ncludes the creation of silly government forms that make you declare you shall eat a pumpkin and not merely carve it. I'm all for low taxes. However, they need to be low on everything. Having taxes removed from one particular good, or for one preferred group of people, isn't really a tax cut. In the end, it's just a transfer payment. If the government taxed everything equally, but then gave checks for the amount of tax you paid for one particular good, that'd be a subsidy, and no one would argue with you on this fact. But that would have the same exact effect as what the situation currently is. In finance, if two financial scenarios have the exact same cash flows under all circumstances, they are deemed equivalent and would have the same price applied, and would be considered interchangeable.

For now, however, we'll be faced with the fact that we'll have to prove were eating a pumpkin pie or pumpkin bread, and not making a jack-o-lantern that is a tax dodger.