The School Year's Biggest Holiday

Students will have to tackle some tough lessons in economics even before school begins this year.

Budget shortfalls have prompted the District and Massachusetts to do away with popular sales tax holidays, during which the sales tax on certain back-to-school purchases was waived. Ten states have pushed their holidays later in the season, sending retailers' sales comparisons into a tailspin. Virginia, however, held fast, with a tax holiday that began Friday and ends Sunday.

"Sales tax holidays are a way for the political leadership of jurisdictions to say to their constituents, 'I'm trying to help you out here,' " said Jim Eads, executive director of the Federation of Tax Administrators, which tracks the holidays.

The sales tax holidays have proliferated in recent years as a way to spur back-to-school spending. This year, as shoppers are squeezed by the recession, retailers say the holidays are more important than ever.

"We have found that sales tax holidays have been tremendously successful at drawing customers into stores and getting them to spend," said J. Craig Shearman, spokesman for the National Retail Federation, an industry trade group. "Americans have hated paying taxes all the way back to the Boston Tea Party."

The NRF predicted that consumers will spend $17.42 billion on back-to-school shopping for students in kindergarten through 12th grade. That translates into about $548.72 per family, down 7.7 percent from last year. The organization said about 85 percent of shoppers cited the recession as the reason for the cutback.

Families are expected to spend an average of $204.67 on clothes and accessories, $93.59 on shoes and $82.62 on school supplies. The one bright spot for retailers is electronics, where spending is predicted to increase 11 percent, to $167.84.

"The economy has clearly changed the spending habits of American families, which will likely create a difficult back-to-school season for retailers," NRF President Tracy Mullin said.

That holds true for many families as well as they try to balance tighter budgets with their children's back-to-school lists. Ellie Kay, a personal finance expert and mother of seven, said she makes sure to include her children in planning the back-to-school budget. She sets a limit for each child and then encourages them to clip coupons, track sales and hunt for bargains to meet it. The twist? The kids get to pocket any money left over, providing them an extra incentive to reduce costs. Kay also said she would willingly pay for a product her children need, but if they want an expensive brand, they have to earn the extra money themselves.

"When life happens, I don't think you should completely shield your children from it," Kay said.

But in this economy, some of the drive to rein in spending is coming directly from kids, said Chandi Neubauer, an analyst with Majestic Research. Majestic surveyed 500 teens last month and found that 81 percent considered themselves sale shoppers, a new trend. They listed retailers such as Wal-Mart, J.C. Penney and Kohl's as value destinations.

"This year, the kids know everything about the economy," Neubauer said. "They're learning a whole new frugality."