Illinois Launches Its First Back-To-School Sales Tax Holiday

Illinois' back-to-school sales tax holiday started Friday Through August 15th, shoppers can buy clothing, shoes and school supplies --- priced up to $100 --- without having to pay the state's 5%sales tax.

Susan Hofer of the Illinois Department of Revenue says the chief reason for the tax holiday is to help families during a tight economy.

"Governor Quinn and the General Assembly felt that this year above all, we wanted to do what we could to give parents struggling financially a break on what they have to spend", says Hofer.

The sales tax holiday is also welcomed by retailers, many of which are promoting the temporary tax break in their advertising. But Mark Robyn of the Washington D-C based Tax Foundation says the savings to consumers are modest, in part because some merchants use the tax holidays to mask their own price increases. Robyn says retailers don't gain either, because shoppers just shift their buying to the tax holiday period, instead of buying more. He calls tax holidays a gimmick.

"If a state needs to offer a holiday from their sales tax", said Robyn during a news conference, "it may be a good indication that there are bigger problems with their sales tax."

Robyn's arguments are disputed by the Illinois Retail Merchants Association, which lobbied for the bill creating the sales tax holiday. The group's president, David Vite, says competition will push merchants to cut prices even more.

"I'm aware of some who are going to be having 15-20% additional-off sales", says Vite. "This 5% is the icing. It's the gravy on the very good meal. It's what makes this an important economic stimulus package. It's what makes a great economic package. And retailers are going to take advantage of it by increased sales, not by increased prices."

The Illinois Retail Merchants Association lobbied for the tax holiday. Illinois joins 16 other states with tax holidays, including Missouri and Iowa. Their tax holidays also started Friday, but only run for the weekend, while the Illinois tax holiday runs through August 15th.