New Hampshire Needs to Lower the Cigarette Tax to Preserve Retail Competiveness

The Union Leader has an editorial today arguing that New Hampshire’s $1.78 per pack cigarette tax rate is too high.  However, the editorial does not really touch on the cross-border shopping angle.  As we found recently, New Hampshire’s economy is a retail mecca for out-of-state shoppers.  More specifically, in 2007, New Hampshire’s economy benefits from an additional $2.2 billion in sales thanks to Maine cross-border shoppers adding thousands of jobs to the economy.

New Hampshire’s cigarette tax back in 2007 was very favorable relative to Maine’s with a tax differential of $14.40 per carton (includes sales tax in Maine) . . . now, not so much with a tax differential of only $5.19 per carton.  Cutting the cigarette tax rate by 10 cents, as currently proposed in the Legislature, would help ensure New Hampshire keeps its retail competitiveness–the tax differential between Maine and New Hampshire would climb to $6.24 per carton.

The Great Tax Divide: New Hampshire’s Retail Oasis vs. Maine’s Retail Desert

The New Hampshire Center for Economic Policy (NHCEP) has some good economic news about important state policies that have worked extremely well for the people of New Hampshire.

“Every state in America is competing with 49 other states for resources, businesses and the jobs they create,” notes NHCEP president J. Scott Moody.  “This new research details some of the policy decisions that make New Hampshire one of the best places in America to run a business.  Our retail and service sectors have the added advantage of being surrounded by states known for high taxes, which emphasize New Hampshire’s sound policies.  For the purposes of this report, we make a state-to-state comparison with Maine, which has a similar population working with dissimilar tax policies.”

“Beyond the results of this study, it is energizing and exciting to be an economist in 2011 with some good news!” adds Chief Economist Wendy Warcholik.  “It’s also very timely too, as the New Hampshire Legislature is considering a reduction to the Cigarette Tax of a dime per pack.  We agree that this tax roll-back will actually increase state revenues and, more importantly, offer stronger incentives for Cross-Border Shoppers to choose New Hampshire.”

“Maine shoppers travel to New Hampshire businesses to such a high degree, that retail locations are few and far between on their side of the border,” Mr. Moody continued.  “Whether it’s for cigarettes or chainsaws or big screen TV sets, New Hampshire businesses are winning the competition for shoppers’ dollars – and also experiencing a less severe recession thanks to the pro-growth state policies that have been in place for decades.”

Mr. Moody concluded: “This new research gives us the rare chance of pointing out some good economic news for New Hampshire in the middle of a recession.  The take-away from this research is that it proves the wisdom of New Hampshire’s low-tax, pro-business policies which jump-start businesses in good times; and reduce the negative economic impact during bad times.”

Read this new report, with Good Economic News for New Hampshire here:  http://nheconomics.org/wp-content/uploads/2010/08/NHCEP-Liberty-in-Economics-Volume-1-Issue-3-The-Great-Tax-Divide-041311.pdf

Mr. J. Scott Moody and Dr. Wendy Warcholik are available for press interviews, on-air appearances and in-person presentations of this research.  If you have any questions or would like to arrange a meeting, please contact Martin Sheehan, the Director of Communications via e-mail at martinsheehan@nheconomics.org or by calling 207-650-7335.

 

Why Vermonters Shop in New Hampshire

Dr. Art Woolf over at Vermont Tiger has announced that he has updated his excellent study examining how the sales tax in Vermont has lead to Vermonters cross-border shopping in sales-tax free New Hampshire.  You can read the full study here (pdf) but below is the money-line:

If Vermont’s border counties [with New Hampshire] had maintained their relative retail sales level, retail sales would be $540 million higher with 3,000 more retail sector jobs in the region.

Vermont has enacted policies that have devastated the towns and cities along the Connecticut River.  To try to help those communities, over the past decade the state has enacted laws and regulations and committed substantial resources to try to revitalize downtowns.  Ironically, the major causes of this decline were state policies enacted decades ago.

The retail sales gap between the two border regions has grown wider each time Vermont increased the sales tax and, as state budgets now depend on those revenues, it will be hard to reverse the negative effects of these policies.

Policymakers on both sides of the Connecticut river should read and re-read this study.  Stay tuned for similar analysis on the Maine-New Hampshire border from yours truly . . .