STEVE INSKEEP, HOST:
Retailers have good reason to be optimistic about back-to-school shopping, thanks to a stronger job market and lower gas prices. But brick-and-mortar stores in many states say they still need an annual sales tax holiday to lure shoppers getting ready for fall classes. Kaomi Goetz of our member station, WSHU, reports.
KAOMI GOETZ, BYLINE: Marcella Ryan and her 8-year-old daughter, Megan, are at a Gymboree kid's clothing store in Stamford, Connecticut. They're looking at a black and white dress.
MARCELLA RYAN: Would you wear this for school?
MEGAN RYAN: Probably.
GOETZ: The mother presses her soon-to-be third grader for a little more feedback.
RYAN: What do you like about it?
RYAN: I like that it has, like, the zipper in the back.
RYAN: OK. Do - you can wear this. This is not too short, right?
RYAN: I don't think so.
GOETZ: The Ryan family is visiting from Virginia. The week before, they also shopped during their own state's back-to-school sales tax holiday. Like Connecticut, Virginia is 1 of 17 states that have an annual tax-free shopping event before the start of school. Each state had its own rules and tax rates. The holidays can last one weekend to a full week, with some starting in late July and others holding off until September. Shopper Marcella Ryan says she's a fan even if stores are more crowded.
RYAN: I think tax holidays are a good idea because you're saving at the end of the day. And you're able to buy more.
GOETZ: Back-to-school shopping is a $26 billion a year business nationwide. This year, the National Retail Federation says families will spend an average of $670. That's up 5 percent over last year.
Craig Shearman is with the NRF. He says with sales tax rates at 5 to 10 percent, a temporary break doesn't compare to a typical store promotion of 20 or 30 percent off. But it's still effective because customers appreciate the help.
CRAIG SHEARMAN: They love it. There's a psychological impact that goes far beyond the amount of money involved.
GOETZ: And brick-and-mortar stores say having a tax-free holiday helps them better compete with online retailers, many of whom don't have to collect state taxes. But a lot of economists are skeptical. Liz Malm with The Tax Foundation, a research group, says the tax holidays don't make a difference.
LIZ MALM: Many studies find that consumers are buying what they would have bought anyway but just doing it at a different time.
GOETZ: The first sales tax holidays began in the 1980s. Malm says they've stuck around because they're politically popular but support may be eroding. North Carolina ended its back-to-school sales tax holiday this year as part of an overall tax reform. Republican state representative John Szoka was one of the bill's sponsors. He says for a dozen years, taxpayers were basically subsidizing retailers advertising. This is the first year without the holiday. He says retailers in his town of Fayetteville are still offering huge discounts.
REPRESENTATIVE JOHN SZOKA: You know, a sales tax incentive on top of the sales like that isn't really going to urge somebody to go buy something.
GOETZ: Instead, Szoka says lawmakers were able to use that $13 million to reduce other taxes. Holiday supporters say the repeal just sends shoppers across the state line to South Carolina during that state's holiday.
HERLEN LUCIEN: That's cute. I need a whole outfit.
UNIDENTIFIED WOMAN #1: Then get the pants if you don't like...
LUCIEN: But you know I'm not - I'm not paying full price though.
GOETZ: Back in the shopping mall in Connecticut, Herlen Lucien is school shopping for her daughter who's about to start kindergarten.
LUCIEN: I usually come right here to these two racks that says 60 percent off.
GOETZ: Lucien says she doesn't give her state's tax-free holiday much thought. She saves money by buying off-season throughout the year.
LUCIEN: For people that, like, wait to the last minute, I think it might be helpful for them. But I don't wait until the last minute.
GOETZ: Connecticut's tax-free holiday is among the most generous. The state forgoes taxes on clothes and shoes priced up to $300. Lucien says that might convince her to buy a more expensive item, like a pair of sneakers or boots. For NPR News, I'm Kaomi Goetz.
NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.