Georgia will waive sales taxes today and Saturday on back-to-school items ranging from clothes to computers, and Tennessee and Alabama will follow suit next weekend.
Chattanooga-area shoppers flock to stores during these sales tax holidays, and retailers say they're some of the busiest shopping days of the year. But tax policy experts question if the holidays live up to such stated purposes as giving working families a break from what's considered a regressive form of taxation.
"With looking and buying for five kids, every little bit helps," Patricia Hinton, of LaFayette, Ga., said Thursday via Facebook. "I've bought some clothes and shoes I've found on sale, but that's it. Major shopping to finish this weekend."
Susan Waskey, center, takes a box of shoes for her son, Nate, 6, Thursday at Sear's Shoe Store in Fort Oglethorpe. Employee Crystal Dempsey assists them in finding the right shoe for the first grade student who is going to attend North LaFayette Elementary this August.More Info
* Georgia state and local sales tax, which is 7 percent in Walker, Catoosa and Dade counties, will be dropped today and Saturday on back-to-school goods such as clothes and shoes that cost less than $100 per item, computers up to $1,000 and school supplies.* In Tennessee, sales tax — which is 9.25 percent in Chattanooga and throughout Hamilton County — will be waived Aug. 7-9 on back-to-school clothing, school supplies, and computers priced at $1,500 or less.* In Alabama, where sales tax varies by city, including 9 percent in Scottsboro and 8 percent in Fort Payne, the back-to-school tax holiday will take place on Aug. 7-9 and will include clothing at $100 or less per item, computers that cost $750 or less, and school instructional materials.
The back-to-school sales tax holiday is a big day for Sear's Shoe Store in Fort Oglethorpe, store owner Jerry Sear said. The store offers 10 percent off, which he said winds up being almost 20 percent off, once the tax holiday is factored in.
"It's probably the biggest day we have going during the year," Sear said.
The Costco warehouse store in Fort Oglethorpe is another area retailer that gets a boost in sales.
"You've got some items that are going to be close to $1,000 - laptops - that are going to be tax-free," Costco Assistant Manager Bill LeBourveau said. "We have great deals in the first place. It just adds to it."
But people would likely make such purchases even without the sales tax holiday, said William Fox, director of the Center for Business and Economic Research in the Haslam College of Business at the University of Tennessee, Knoxville.
"I go out, and I'll buy a pair of tennis shoes," Fox said. "It hasn't changed how much I buy, it's just changed when I buy it."
The tax holiday may discourage retailers from holding back-to-school sales, he said.
"The winner may be the retailer," he said. "They don't have to reduce their price to get customers to come in."
Tennessee is one of seven states that doesn't have an income tax on wages. So sales tax provides about 55 percent of the state's revenue, Fox said, compared to a 30 percent nationwide average. Tennessee's sale tax is "here to stay," he said, since voters last year approved by a 2-to-1 margin an amendment to the state constitution that bans any state or local income tax.
But Fox says the answer isn't to cut sales taxes on certain days.
"Tax a broad amount of things at low rates," he said.
When some goods and services aren't taxed, he said, it drives up the tax on those that are. So Fox is OK with Tennessee's 5 percent sales tax on groceries, and he favors a low tax on services that currently aren't taxed in Tennessee, such as visits to the eye doctor and the dentist.
"I don't support taking the sales tax off food," Fox said.
Another critic of sales tax holidays is Matthew Gardner, executive director of the Institute on Taxation and Economic Policy (ITEP), a non-profit, non-partisan research organization with offices in Washington D.C., North Carolina and Wisconsin.
"These holidays aren't all they're cracked up to be," said Gardner.
Sales taxes make up about half of all states' income, says a recent ITEP report, but they are inherently regressive because the lower a family's income, the more the family must spend on goods and services subject to the tax.
But people living paycheck-to-paycheck are least likely to have the disposable income necessary to take advantage of a sales tax holiday, the report says. Instead, ITEP says states would better serve people through a refundable low-income sales tax credit.
Sales tax holidays date back to 1980, when Michigan and Ohio first applied it to automotive sales, the report says. At least 17 states will waive sales tax during holidays this year for items ranging from energy-efficient appliances to severe weather preparedness, the report says, and that will cost the states more than $300 million in tax revenue.
Georgia Retail Association officials say families in the state spend an average of more than $600 on clothes, shoes, supplies, electronics and other items as children head back to school. Georgia Department of Transportation officials said that construction-related lane closures near shopping centers will be put on hold to accommodate extra traffic during the tax holiday weekend.
The Associated Press contributed to this report.
Contact staff writer Tim Omarzu at tomarzu@timesfreepress.com or www.facebook.com/tim.omarzu or twitter.com/TimOmarzu or 423-757-6651.