Iowa's tax free weekend is underway

(The Center Square) - Iowa shoppers are getting discounts from the state this weekend.

The annual tax-free weekend, held on the first Friday and Saturday of August each year, removes the sales tax from shoes and clothing priced less than $100.

Also included are items such as pantyhose, bowling shirts, choir clothes and diapers--for adults and children, according to a list from the Iowa Department of Revenue .

The state sales tax in Iowa is 6%. Local sales taxes, which vary, are also removed on eligible items.

The tax-free weekend occurs just as children prepare to return to school. While it can save families a little money, according to The Tax Foundation, it can also be problematic.

"From a political standpoint, sales tax holidays are harmful because they create space for politicians and regulators to pick political favorites in the process of selecting eligible products," the organization said in a report. "They also pave the way for lobbyists to solicit policymakers in hopes of securing a sales tax holiday exemption for their products."

And there's the question of whether or not the holidays provide real relief for families.

"Overall, sales tax holidays are an inefficient vehicle for providing tax relief or generating additional economic activity," the Tax Foundation said in its report. "They often end up hurting the taxpayers they intend to help. They inject unnecessary instability into government and business revenue streams; create administrative and compliance costs for businesses, governments, and consumers; and do not promote long-term economic growth."

Some states no longer offer tax-free holidays, but 19 states do. Some states offer sales tax breaks on more than clothing.

Missouri, Iowa's southern neighbor, also exempts school supplies, computer software, personal computers and graphing calculators with purchase limits. Mississippi and Louisiana both offer tax-free holidays for firearms and ammunition, according to information from the Tax Foundation.

The holidays can have a negative effect on small businesses, according to the Tax Foundation report.

"Additional short-term staffing is often necessary to handle the induced spikes in demand, and that can be harder to schedule for businesses with fewer employees," the report said. "Moreover, small businesses may find it more difficult to absorb the spending slowdowns in the weeks immediately before and after sales tax holidays, as consistent revenue is more important when margins are thin."