Most people know that holiday retail sales are important to state and local governments that rely on the collection and remittance of sales tax in their jurisdictions. But the success of the holiday shopping season also impacts federal tax collections, albeit indirectly. When businesses enjoy a profitable period, they generally owe more income tax. Plus, they may increase hiring or the pay of current employees, which usually leads to higher payroll tax and individual income tax collections. Higher collections, in turn, can make more money available for federal spending and boost economic indicators that many business leaders rely on to make strategic decisions.
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