Many states are implementing a tax holiday in the coming weeks, hoping to boost retail sales and let struggling families get more for their money in a down economy. Experts are divided as to whether the scheme actually drives more shoppers to make purchases
Back-to-school shoppers got busy at 6 a.m. Friday at the Woodfield Mall in Schaumburg, Ill., taking early advantage of the state’s new tax holiday.
For 10 days, Illinois is waiving its 5 percent state sales tax on certain purchases, including school backpacks, pens, notebooks, and most clothing items under $100. All the employees at the Woodfield J.C. Penney will have lists on hand to help shoppers understand which items qualify. (A 1.25 percent tax distributed to counties and towns will still be collected, plus any additional local taxes).
Illinois joins 18 other states, ranging from Florida to New Mexico, in offering a tax break to shoppers in 2010. That’s the highest number since New York first launched a tax holiday in 1997. Most of them start this weekend and are pegged to school shopping.
North Carolina’s back-to-school tax holiday this weekend is the nation’s most generous. The state's 5.75 percent sales tax is waived not only on clothing and school supplies under $100 per item, but also on computers under $3,500, computer equipment under $250, and instructional materials under $300.
School shopping is a popular impetus, but not the only one, for tax holidays. Several states also pick a time to drop taxes on energy-efficient appliances, hurricane-preparation supplies, or even firearms.
Retailers anecdotally report a net increase in sales because of these events, but “that’s secondary to helping families stretch their dollars farther, [especially] during the current economy,” says Craig Shearman, a spokesman for the National Retail Federation in Washington.