16 states and Washington D.C. have already implemented sales-tax holidays ranging from two to seventeen days. Washington’s programme, which will run between November 21 and December 7, applies exemptions to the 5.75% sales tax. The programme suggested by Republicans in New Jersey proposes a 50% cut in the 7% sales tax. Areas designated urban enterprise zones, where sales tax is already just 3.5%, would also see sales tax cut in half.

The state received USD500m in sales-tax revenues during this period last year. This year, however, 4th quarter consumer spending is expected to drop by almost 1%, according to a survey of economists by Bloomberg. The New Jersey economy has not experienced negative change in sales figures since 1992.

According to Assemblyman Alex DeCroce, a supporter of the plan, the tax exemptions would more than pay for themselves through increased retail sales figures. He has also argued that a sales tax reduction of that nature would attract buyers from neighbouring states such as New York and Pennsylvania. Sales tax currently ranges from 6%-7% in Pennsylvania and 7%-8.75% in New York.

However, Democratic Governor Corzine is known to oppose the idea, having expressed doubts that it would generate enough revenue from the boosted sales figures to compensate for the reduction in collected tax. He also believes that people are more worried about their economic security than shopping while the economy is weak.

The governor has already had to make huge adjustments to the fiscal budget to compensate for the projected drop in tax revenue as the economy continues to slow, for the most part by cutting thousands of state jobs and aid to towns and hospitals. Corzine is reluctant to spend money on new schemes, although he is expected to announce a ‘one-time economic stimulus package’ on Thursday.

So far Corzine has been able create a surplus of USD600mn from his original USD33bn budget. The state has been told to prepare for a further 5% trim of the budget if revenue for the fiscal year falls short.