, Salem, MA

August 2, 2013

Our view: Taxes drive retail trade over the border

The Salem News

---- — Massachusetts legislators can pat themselves on their backs. Their recent tax hikes on Bay State residents will continue to drive retail dollars over the border to New Hampshire.

Of course, they will tell you this was never their intention. They strongly support Massachusetts retailers, as evidenced by their backing of “sales tax holidays” — for one weekend per year.

Someone needs to explain to this gang the concept of unintended consequences.

The Democratic-controlled Legislature passed a package of tax hikes aimed at funding transportation projects and then overrode Gov. Deval Patrick’s veto — a veto that came only because Patrick wanted a larger tax increase.

Among the increases are a $1 per pack bump in the tax on cigarettes and a 3 cents per gallon boost to the tax on gasoline. Cigarettes and gasoline — two products local residents have shown they are more than willing to travel to New Hampshire to purchase.

Why make the road trip for a carton of cigs and a tank of gas? Because the lower tax rates in New Hampshire can mean substantial savings over the course of a year. The tax on a pack of 20 cigarettes in Massachusetts starting this week will be $3.51, the second-highest rate in the nation after New York’s $4.35 per pack. In New Hampshire, the tax also was increased this year — by 10 cents from $1.68 to $1.78.

Buying her cigarettes in New Hampshire saves Haverhill resident Delis Alexandra $240 per year.

“That’s a lot,” she told reporter John Toole as she shopped at Foods Plus Discount in Plaistow, N.H.

Foods Plus owner Norm Dalphond feels their pain but is happy to have the business.

“It’s unfortunate they have to go up at all,” Dalphond told Toole. “We’ve been hearing about this the last two weeks. Their reaction was they are coming here.”

But Dalphond wonders about the long-term wisdom of tax-hungry legislators’ strategy.

“They always seem to pick on the same people,” he said. “Truthfully, do you wonder where the end is? What if cigarettes go away? How is anybody going to balance their budget?”

Legislators in Massachusetts made certain that gas tax revenues won’t decline any time soon. The made the increase permanent by tying the tax rate to inflation.

Massachusetts increased its gas tax from 21 to 24 cents a gallon. New Hampshire is holding the line at 18 cents.

That’s enough to make New Hampshire residents who drive in Massachusetts fill up before they leave home. Curt Gracie, a carpenter from Salem, N.H., told Toole it costs him about $12 more to fill up his pickup in Massachusetts because of taxes, so he tries to avoid doing so.

It’s a simple lesson from economics — taxation influences human behavior — but one that Beacon Hill legislators seem incapable of understanding.

“It’s no surprise that Massachusetts residents are voting with their feet against higher taxes on gas and tobacco,” said Greg Moore, state director for Americans for Prosperity-New Hampshire. “States operate in a competitive environment, so smart consumers will shop around for the best deal, and that’s exactly what’s happening.”

The flight of retail business from Essex County to Southern New Hampshire has hurt Massachusetts border communities. But grasping legislators, even those who supposedly represent our communities, do not care. They have their revenue. To them, that’s all that matters.