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Tax Holiday a hit for state budget

This time next week, back-to-school supplies and clothes will be temporarily tax-free for the state's annual sales tax holiday weekend. But while shoppers will save some extra money, state and local budgets will take a hit at a time when every dollar counts. WFAE's Julie Rose reports: Last August, North Carolina shoppers saved nearly $20 million in sales taxes during the three-day tax holiday. Which means the state and local governments took a $20 million hit to their bottom lines. This year, Governor Bev Perdue and state lawmakers are considering raising taxes to fill a billion dollar shortfall. But Perdue says the sales tax holiday will go ahead as usual, because families need a break during these tough economic times. And lawmakers hope the government-sponsored sale will be a boost of the economy. Verenda Smith of the Federation of Tax Administrators says there's no guarantee. "People also have a tendency to shop that weekend instead of other weekends," says Smith. "It doesn't necessarily generate new spending. It just shifts spending habits." North Carolina is one of only 17 states offer a temporary reprieve from sales tax - typically during the back-to-school season. But budgets are so tight nationwide that the Federation of Tax Administrators says at least one state and the District of Columbia cancelled their sales tax holidays this year.