The Beauty of Tax Free Weekend

This past weekend was tax free weekend in North Carolina.  For those of you who don't have a tax free weekend, it's a beautiful thing.  Select items, usually focused around back to school, are exempt from sales tax all weekend (see a full list of exempt items).  You can purchase them online or in the store -- either way you're safe from that pesky 7% of taxes.

I used this year's tax holiday to buy that MacBook Air I had my eye on for the past month.  Macs are a high priced item that are almost never on sale, so tax free weekend is the perfect time to knock ~$100, depending on the model, off a price that would never be discounted like that in other circumstances.  However, it's not just these big ticket items that drive people crazy over the weekend -- malls are swamped, highways are backed up, and stores are flooded with people looking for items as cheap as $10.  I actually had someone tell me they were looking forward to tax free weekend to use a $10 Kohl's coupon they had randomly found.

You don't need to a lecture from Dan Ariely to understand that consumers can act predictably irrational when goaded with a perk or gimmick -- this one being the 7%.  While many of the items likely would be bought anyway, there are certainly people who buy more than they intended to or end up visiting more stores at the mall because of the allure of getting something tax free.  

People get put to work by stores bringing in part-time help or working people overtime, local businesses get an influx of dollars, and consumers get some much needed relief in hard times.  Tax free weekends seem like a win all around to me and yet only 20 states currently have them in place.  Some state governments are concerned about the cost to the state.  

Don't get me wrong, in the recent debt ceiling debate I was on the revenue-raiser side, but a gimmicky weekend to spur spending doesn't strike me as something that could imperil a state's balance sheet.  This year's tax free weekend is anticipated to cost the state of North Carolina around $14.5 million.  Certainly not a number to scoff at, but let's put it in a little perspective.  The state's current budget is $19 billion, meaning that in budget full of loopholes and tax breaks, this weekend for consumers amounts to .07% of the state's spending.  Hell, the earned media the state and its Department of Revnue get for hosting the weekend probably amounts to close to $14 million.

It seems like a no-brainer to me that more states (I'm looking at you, Ohio) should put this policy in place to promote in-state shopping and give consumers a break.