Some States Cancel Sales Tax Holidays Parents are gearing up for their children to return to school. Many states offer "sales tax" holidays on school-related items like computers, clothes and supplies. Parents like the discount and retailers enjoy the boost in sales. But this year, government budgets are squeezed and some say states can't afford the loss in sales tax revenue.
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Some States Cancel Sales Tax Holidays

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Some States Cancel Sales Tax Holidays

Some States Cancel Sales Tax Holidays

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NPR's Kathy Lohr reports.

KATHY LOHR: Parents, and even people who don't have kids, are excited about the tax-free days.

M: A lot of people are struggling, and so they look at it as being really very helpful.

LOHR: Outside an Atlanta-area Target store, Ann Rigsby said she may buy clothing and school supplies for her niece and nephew, and perhaps an outfit for herself. Even though the state faced a more than $2 billion budget deficit this year and recently had to make additional cuts, including teacher furloughs, Rigsby says she's glad Georgia didn't cancel its tax-free weekend.

M: I tell you, I did have that thought, can we really afford it as a state with the schools, teachers taking three days off? But, you know, this kind of cuts across and helps everyone, and this is the time of year when people with kids - they have to buy things.

LOHR: Another shopper, 18-year-old Stephanie Horman(ph), is looking forward to starting college. She and her parents are thrilled about the prospect of a tax- free laptop computer.

M: They're big into it, I guess. My mom keeps telling me, if you need to get more clothes, get it this weekend for tax free - stuff like that.

LOHR: And computers are exempt, but most states have limits. In Georgia, it's $1,500.

M: Retailers are wildly supportive of this.

LOHR: Maureen Riehl is with the National Retail Federation. Florida and Illinois failed to approve the holidays this year, and the District of Columbia canceled its scheduled tax-free weekend because of budget problems. But, Riehl argues, states generally don't lose much revenue.

M: When people come in to take advantage of the sales tax holiday, they usually buy, with it, other taxable items. So, while there may be a little dip for those two or three days, it spreads out over time and arguably, they're making up for it with additional purchases in taxable item categories.

LOHR: But some analysts argue that consumers don't buy more, but instead shift their spending. Kim Rueben is an economist at the Urban Institute's Tax Policy Center.

M: I think it affects more the timing rather than the total overall amount people are going to spend. And if you think now people are tightening their budgets, it's not clear to me that having a sales tax holiday is going to make people go out and buy things that they can't afford - or that we necessarily want them to go out and buy things that they might not be able to afford.

LOHR: Rueben says the tax holidays were a good idea when the economy was doing well and states were adding money to their coffers. But with tax revenue declining in just about every area, she says state officials should reconsider the idea.

M: I think in general, they should be thinking about what's happening - long run. And if you're giving them a break for a day and then you're going to end up having to raise taxes, I don't know if that's really smart.

LOHR: Kathy Lohr, NPR News, Atlanta.


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