Fri 22 Apr, 2005 09:24 am
Last year, gift cards surpassed clothing as the nation's most popular present. But sometimes it's retailers who get the real gift: If people don't use the cards before they expire, the unused money goes back to the business that issued them.
A bill scheduled for a vote Monday in the Oregon Senate would impose an expiration date of three years and declare any unspent money on the cards as abandoned property. That would let the state claim as much as $40 million a year for the Common School Fund. Interest earnings from the fund go to K-12 schools.....
(full story: http://www.oregonlive.com/news/oregonian/index.ssf?/base/front_page/1114164090284080.xml&coll=7
I think this is a pretty interesting idea.
What do you think?
I don't see any drawbacks right off. Maybe higher prices for the clothes since it's something the retailers depend on? But surely the $40 mil is spread out among lots of retailers.
Gonna read the thing now...
In Ohio, the state requires that every business and everyone holding an employers registration report unclaimed funds each year. I would suspect most or all states do. It would probably not involve much of an effort to reap the benefits of such a ploy.
(Couldn't access, need to register.)
Here is the rest of the article:
Nationwide, as much as 40 percent of the face value of gift cards is never cashed -- an estimated $14 million from last Christmas alone in Oregon, said Sen. Ryan Deckert, D-Beaverton, who sponsored the bill at the urging of teachers unions, school boards and other advocates.
The battle over unused gift cards is raging in several states. In some, consumer groups are pushing bills similar to Senate Bill 845; in others, business groups are trying to undo regulations.
The money from unredeemed cards goes to mostly out-of-state businesses, Deckert said, and with SB845, "at least we'd see a school benefit from all the unused cards flying around out there."
Some Republicans aren't enamored of the idea -- "In this building, they are looking for any gimmick to get money," said Sen. Gary George, R-Newberg -- and retailers say the bill simply is unneeded.
Julie Brandis, a lobbyist for Associated Oregon Industries, said many businesses, such as Starbucks, are moving to technology that lets customers recharge their cards. Most retailers now offer gift cards that do not expire, Brandis said.
"We don't do that anymore," she said.
One of the few places I've ever bought a gift card was from The May Company and they have always had a disclaimer that after two years (I think) that any unspent money was donated to charity.
That is one of the reasons that I bought the cards there.
I think if retailers embraced this idea instead of fighting it they could come out smelling of roses.
Do they really rely on that money? What would happen if everyone redeemed the gift card and they were relying on people not doing that?
Considering the recent lawsuits over the No Child Left Behind Act and the uproar over schools selling out to junk food vending this could be a very interesting issue to watch.
We don't do what anymore, let gift cards expire?
Hmm, from the rest of the article (thanks for posting it) it seems like the most likely outcome will be that retailers will ramp up efforts to keep gift cards from expiring, which could be a nice thing itself I guess.
George's quote is weird. Kinda like saying while in the Pentagon, "In this building, they are looking for any gimmick to get money." Well, yeah. And?
Re: This is your school on Gap:
I think this is a pretty interesting idea. What do you think?
I think the bill would work out as a tax on businesses roughly proportional to the value of the gift cards they issue. Freshman economics predicts that business will react to this tax as they would to any other: by raising prices on the stuff they sell, and by issuing fewer gift cards. From a fiscal point of view, there are worse ways to raise taxes, but there are better ways as well. From a PR point of view, it allows the government to invent a new tax without calling it a tax, so that's nice for the government. But if Washington schools really need money, I would prefer them to be honest about it and have a good, straight, old-fashioned sales tax increase, which is what this really is. If they don't, I prefer no tax at all. And it mildly annoys me that this bill is having Washingtonians for fools by pretending to give them something for nothing.
I see it more as state eschete laws. An employee leaves and the final check is undeliverable. In most states, the employer must turn the money over to the state. They have bought labor and claimed the cost as an expense for taxes. They don't get to keep the money.
Luckily, I have never presented myself as an expert on economic theory!
The reason I ask "what do you think" questions is in hopes that people will fill me in on aspects I hadn't considered. So I thank you, Thomas, for your reply.
Let me see if I've got this straight:
Gift cards (as opposed to gift certificates) are a pretty recent innovation, aren't they? I don't recall much push on them except within the last few years when the market seemed to explode.
Companies don't expect all the cards to be redeemed and this helps keep the prices low.
Using the numbers from the article - an estimated $40 million in unredeemed cards in Oregon last year - how in the world did they manage before the advent of gift cards?
I don't shop enough to know - have prices at the stores that heavily promote these cards dropped in the last few years?
Or are these companies getting something for nothing?
By the way, Oregon has no sales tax.
I know that there is no free lunch but it seems to me that the companies are really the ones at the snack bar.
I think Thomas reacts from a stereotype of what businesses do. In Ohio, and other states of which i know, and very likely in most or all states, The Gap is required to report unclaimed funds and hold them for a period delimited by statute. That money is no longer theirs as soon as it has been purchased. That it goes unredeemed doesn't mean they get to dip into the till for a little extra profit. In Ohio and several other states of which i know, and very likely in most or all states, they will eventually be required to either turn the money over to the state (which will put it in a general revenue fund very likely), or place in a state-maintained escrow account. It seems that all we have here is a case of Washington regularizing such practices in a manner alreay established in other states.
I think Thomas reacts from a stereotype of what businesses do.
Oh, absolutely! But it's a stereotype that's been known to predict the behavior of businesses and consumers quite well, which makes it a useful thing to react from. Even if this reclaiming of unclaimed funds is something that other states do anyway, that doesn't change the reaction I predict, so doesn't change my preference for a sales tax increase. But I admit I may well have spoken too harshly about the motives that inspired the authors of the bill.
I must have been typing while roger was posting becuase he is saying essentially the same thing you are Sentanta - and I thank you both.
Going back and rereading the article I see where it says that "business groups are trying to undo regulations [in other states]" while other's are trying to adopt similar regualtions.
The article also says that "The money from unredeemed cards goes to mostly out-of-state businesses" when talking about Oregon.
It sounds like each state deals with this in a very different manner.
Not putting an expiration date on the card, like the article suggests, doesn't sound like it would solve the situation - the money still exists in the account. If the card is lost would the money just sit there forever?