Schoolchildren grew taller, their feet got bigger and their backpacks fell apart since the final bell rang.
But back-to-school shoppers waiting for the tax-free holiday to replace the old with the new won’t find that relief at the register this year. State legislators did not approve a renewal of the popular tax break weekend, citing a $2 billion budget deficit that leaves no room for a reprieve.
Sales-tax free weekend aimed to help consumers save on apparel, footwear, school supplies and computers began in 2002. While it generates a frenetic buzz for shoppers and retailers alike, it costs the state $12 million in revenue. A similar break usually held in October for energy efficient appliances and other items results in a $500,000 loss. The weekend of tax-free purchases, proposed this year for July 29-Aug. 2, has to be created by legislation every year.
This year, there was neither the will nor the money to do so.
“What I hear Georgians say is they’d rather have their classroom teachers in the classroom teaching than have that sales holiday,” Speaker David Ralston (R-Blue Ridge) said in March as budget negotiations in the House and Senate intensified.
Georgians pinched by job losses and financial crisis can ill-afford to have the break snatched away, said Sen. Tim Golden (D-Valdosta). After his wife annually crossed into Florida to take advantage of its tax-free holiday, he helped create the sales tax holiday. Today, 16 states and Washington, D.C., including Florida and South Carolina, have variations of tax-free holidays. While Florida resumed its tax holiday after a two-year hiatus, Georgia is the only state this year to drop it.
“This year, of all years, people need it,” said Golden, while acknowledging the state’s financial dilemma. “Retailers need the boost more than ever and families need the boost more than ever.”
John Heavener, president of the Georgia Retail Association, believes the state actually nets about $20 million during the sales tax breaks from salary, corporate and other tax revenue generated. He said the back-to-school shopping season is the second most important after Christmas for many retailers, especially for discount and department stores.
Heavener sent lawmakers a study showing these figures, which he called conservative, but his efforts didn’t turn the tide.
“We were hoping as retailers that the common sense approach would work, and that looking at the facts and figures would convince them it was worth it in a year when everything was up in the air,” said Heavener.
He fears that the sales tax holiday may not come back anytime soon. The Legislature appointed a committee to look at the state’s entire tax structure this year, and he believes the sales tax breaks could get sidelined indefinitely. Currently, state sales tax is 4 percent, but add-ons for county and local governments drive the average sales tax up to 6.5 percent, he said.
The National Retail Federation says retailers report a 30 percent increase in sales during tax-free shopping. Few would bolt to stores for a 5 percent off sale, but the same amount disappearing in sales tax becomes an event.
“The psychological appeal goes far beyond the cash register,” said J. Craig Shearman, vice president of government affairs for the NRF. “As tight as the economy is today, a few cents can mean a lot.”
Karon Warren of Ellijay doesn’t revamp her pre-schoolers wardrobe for school shopping, but has always seen the sales tax holiday as a bonus.
“It’s a little disappointing it’s not happening this year,” Warren said.
Retailers are rolling out aggressive sales and promotions with the hope that consumers will hardly notice the difference. Bobby Johnson, BrandsMart’s senior vice president of sales, said the traffic usually driven to those days will be more spread out because there will be “no sense of urgency.” Still, retailers don’t expect consumers to turn away because the tax break has gone away.
“Shoppers will not lose out,” said North Georgia Premium Outlets general manager, Heather Halpern. “They will have a great sale during a period they will be missing the no tax benefit…These savings will far exceed the tax free savings.”
AJC staff writers Aaron Gould Sheinin and Rachel T. Ramos contributed to this report.