OPINION:
Black Friday bargain hunters are scouring circulars and combing through websites in search of ways to save on Christmas shopping, and many of them are missing a bargain they could get by driving to shops and stores in states with low — or no — sales taxes.
Americans expect to spend nearly $60 billion this weekend — more than $410 per shopper. Because sales tax rates vary from state to state, sometimes dramatically, bargain-hunting motorists willing to drive to another state can save up to 10 percent on Black Friday shopping.
Four states — Delaware, Oregon, Montana and New Hampshire — impose no state or local sales taxes. Nor does Alaska, but towns and cities can apply local option taxes, and some do. The Tax Foundation calculates a statewide average of just 1.69 percent in Alaska.
Tennessee levies an average combined state and local sales tax of 9.45 percent, the highest in the nation. A typical Tennessean will pay $39 in taxes on their holiday shopping.
It wouldn’t make economic sense for a Memphis shopper to drive to Bozeman — a distance of 1,100 miles — to save $40 in Tennessee sales taxes, but many Americans in high sales tax states make a short drive to states with a low sales tax, or no sales tax at all. Savings on big-ticket items, such as computers, television sets and major appliances can be substantial.
States with high sales taxes, imposed by legislators who think the way to collect buckets of revenue is to impose steep tax rates, lose millions of dollars instead. Not only does tax revenue in states with high sales taxes decline, but businesses are hurt when they’re forced to compete with competitors in lower tax states. Economic growth and job creation suffer.
Every year, for example, hundreds of thousands of bargain hunters go from Metropolitan Philadelphia, where average sales taxes are more than 6.3 percent, to shop in nearby Delaware, which is has no sales tax. The 20-minute drive from downtown Philadelphia to Wilmington can yield big savings.
Hotels in New Hampshire have begun offering specials to shoppers fleeing to the state in search of tax-free shopping. Parking lots at malls tell the tale, with license plates from New England and high-tax New York identifying shoppers who come from near and not so far away.
No state gets more of such revenue than Oregon, which attracts shoppers from adjoining Washington, which has the nation’s fourth-highest sales tax, at 8.88 percent, and California (eighth-highest) and Nevada (14th-highest). Idaho, which borders Oregon on the east, extracts a 6 percent sales tax. That’s good news only for merchants in Oregon, which has no sales tax.
Legislators who argue that their states can’t afford to lower their sales taxes have it backward. They actually can’t afford not to. Lowering sales tax rates won’t hurt a state’s bottom line. They’ll collect more revenue. Otherwise, Black Friday can take on a new meaning as merchants have to turn out the lights.
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