States Encourage Back-to-School Spending with Tax-Free Weekends

State tax-free weekends are a great way to stock up and save on school supplies and clothes, and states across the country are encouraging parents to take advantage of the holiday.

Tax-free weekends offer a savings on average of $0.08 for every dollar spent, typically up to $100, but in some cases higher for items such as computers.  A lesser cap of about $20-50 is placed for school supplies.

South Carolina is the only state to not have a spending cap for its weekend, which took place August 1-3.

The National Retail Federation found that on average, a single family will spend about $669 on school supplies and clothes in the summer months.  Tax-free weekends will save them about $55 of that.

As a nation, Americans spend about $72 billion on back-to-school shopping.

“It just plain saves them money,” said Walmart representative Todd Manley.

The savings aren’t just in stores.  Consumers can shop tax-free online during these weekends as well.

Stores offer extra sales on top of the no-sales tax in order to drum up even more business.  L.L. Bean discounted backpacks by 25%, Apple is offering $100 gift cards to college students who purchase a Mac, and school uniforms are on sale at a number of stores.

About one-third of states are participating in the tax-free weekends this year.  Texas held its 16th annual tax-free event last weekend.  State legislators are looking to raise the savings to a total of $150 next year, and add computers to the list of tax-free items.

The majority of the states that participate in tax-free weekends held them the first weekend of August.  These states include Alabama, Arkansas, Florida, Georgia, and Iowa, as reported by Kelly Phillips Erb for Forbes.

Other states, such as Alaska, New Hampshire and Oregon, already do not have sales tax.  And some, such as Pennsylvania and Vermont, do not require sales tax to be paid on certain items, such as clothing.

Six states currently offer an exemption on computer purchases during their tax-free weekends.  People in Alabama can spend $750 on computer-related items; Georgia and New Mexico have a cap of $1,000; and Missouri residents can spend a whopping $3,500 on computers tax-free.

Although these weekends are popular, economists say they are not good for public policy.

“Just because sales tax holidays are popular among politicians, consumers and businesses, that doesn’t mean they make economic sense,” said Liz Malm, an economist at the nonpartisan Tax Foundation. “If a state must offer a ‘holiday’ from its tax system, chances are there is something wrong with the tax system overall, and it isn’t competitive.”

Several studies have shown that states lose money during these weekends.  In 2013, Georgia State University’s Fiscal Research Center reported the state losing almost $41 million.  In 2012, Massachusetts lost $23.3 million, writes Reid Wilson for The Washington Post.

These losses have caused several states, including Florida, Massachusetts and Maryland to cease the tax-free weekends.

Despite this loss, the weekends remain popular among retailers, who enjoy a higher traffic flow throughout their stores.

“Our members that track these find they drive traffic into the stores. When you’re driving traffic into the stores, you’re increasing sale,s not just on items that are subject to the sales tax holiday but on items that aren’t subject to the sales tax holiday,” Rachelle Bernstein, of the National Retail Federation, said in an interview last year.