1% Sales TaxBack to Issues Page
I would vote against the 1% sales tax if it were before me today. I’m open to having my mind changed, but currently I’m not convinced that it would be economically successful. It has other problems as well.
The New Hampshire border
The obvious problem is that New Hampshire’s 0% sales tax is a two minute drive from town. I’m not aware of any studies on price sensitivity that would give us clear direction on what the economic impacts would be. I think even merchants who currently oppose the tax would support it if they could be sure that it wouldn’t do serious damage to the economic viability of the town.
The presence of New Hampshire means that the success of the rooms and tax is useless in predicting what the outcome of the sales tax would be. New Hampshire has a 9% rooms and meals tax, as does Vermont. Brattleboro’s is 10% with the currently instituted rooms and meals tax. That 1% difference is generally not enough to change behavior. Plus, rooms and meals are more tied to location. If you take a weekend trip to Brattleboro, you might drive to Keene for an afternoon of shopping, but you’re still probably going to stay in Brattleboro, and you’re going to eat most of your meals there.
Of course, it’s possible that a 7% sales tax gap wouldn’t change shopping behavior versus the current 6% gap: the people who want to save 6% are already shopping in New Hampshire, and the people who tolerate the 6% now wouldn’t be particularly sensitive to 7% instead. I’m open to this line of argument, but I’d need some compelling data.
Economically, I think the 1% sales tax is too much of an unknown for me to support it at this time.
Sales taxes are regressive
Another problem is that sales taxes, like all consumption taxes, are regressive. They hit poor people hardest relative to their budgets. Most people, rich or poor, buy the same amount of toothpaste, and for similar prices. But the extra 1% on purchases is a much larger proportion of a poor person’s budget. In addition, a sales tax is much more likely to apply to necessities than a rooms and meals tax, which almost by definition will come out of disposable income.
This is not a dealbreaker for me. Everyone benefits from the town having more money to spend. If the economic benefits to the town were less uncertain, I would be inclined to support the 1% sales tax despite its regressive elements. However, this is a real concern and another thing that pushes me away from it.