New Hampshire has discovered a good way to boost its economy during these troubled times. Unfortunately, it’s not a solution that lends itself for application elsewhere.
It involves having one’s state located next to another state that is being run by economic idiots.
Right now, Massachusetts is currently considering raising its sales tax from 5% to 6.25% — a 25% hike — to help cover a hefty budget deficit. And more and more Massachusetts residents are calculating the costs of that tax versus the price of gas.
Suppose a resident of Massachusetts is considering buying a $1,000 television. Should they buy it in Massachusetts, the final price will be $1050 — or $1062.50, under the proposed tax.
On the other hand, New Hampshire has no sales tax. (Or income tax, for that matter.) So some Bay Staters are whipping out their calculators and running the numbers. Suppose they live 40 miles from a New Hampshire store that sells the same TV at the same price. Presuming their car gets 20 miles per gallon and gas is $2.50 a gallon, they will spend $10.00 in gas to save that tax money — meaning a savings of $40.00 or $52.50. Toss in a few other purchases, and the savings start adding up quite nicely.
Of course, Massachusetts isn’t taking this lying down. Under their law, residents who buy taxable merchandise out of state are supposed to report it and pay the tax. This is, obviously, one of the most ignored laws on the state’s books. The Commonwealth is trying to get around this by “persuading” businesses with locations in both states to collect Massachusetts taxes on New Hampshire sales to Massachusetts residents, but the businesses in question — and the state of New Hampshire — are fighting back against being drafted by Bay State tax collectors. In fact, New Hampshire is working on a law that would essentially forbid businesses from sharing information on their customers from other states for the purposes of tax collection.
This is yet another sign of the increasing mobility of the American people, and their growing independence from geographic and political boundaries. Last year, Maryland decided to help fix its budget by raising the income tax on people who made over a million dollars — a pool of about 3,000 people. One year later, that pool had shrunk to around 2,000 people.
The lesson is simple: if you push people too far with taxes, they will simply take their money (and, occasionally, themselves) elsewhere. This is a lesson that, unfortunately, will go unlearned by many of those holding the reins of power.