The Portland Press Herald ran an editorial on September 8 stating that lowering Maine’s liquor prices is bad public policy. Their logic: lowering prices is bad because it might encourage more people to drink, which would unleash other social costs.
The problem with that logic is that Mainers already have easy access to cheaper booze: they can simply buy it across the border in New Hampshire.
Cross-border shopping in New Hampshire is a major pastime for Mainers. We all know people who make a regular run to buy liquor, cigarettes or other everyday items in New Hampshire. When Mainers go on out-of-state vacations, they take orders from friends and family for the quick stop at the Portsmouth liquor store on the way home.
Put simply, with a little planning, there is virtually no one in Maine who doesn’t already have access to cheaper liquor in New Hampshire. In fact, as shown in the picture above, New Hampshire even pays you to come buy it. The state offers you a $25 coupon, which more than covers your gas bill to make the trip. As the ad in Down East magazine puts it:
“Explore Endless Summer Savings at your nearest New Hampshire Liquor and Wine Outlet—conveniently located across the state. Offering the best selection of wine and spirits at the lowest prices in America.”
In addition, New Hampshire is running a larger ad campaign, called “Load Up New Hampshire.” The state’s online website, www.loadupnh.com, proclaims:
“NO SALES TAX! Every Day, Every Year!
Substantial savings on all beer, wine, and ales
Up to 30.5 cents savings per gallon of gasoline
No state withholding on lottery ticket winnings
As much as $26.70 savings per carton of cigarettes”
Furthermore, the Portland Press Herald editorial misses a much larger point. Think about this: Why does New Hampshire go through all the trouble of running glitzy ads just to sell liquor? Because it isn’t just about liquor.
They know that once you get to New Hampshire, you’ll stay for other shopping and take advantage of other lower taxes on items such as cigarettes and gasoline—plus, there’s no general sales tax in the “Live Free or Die” state.
Of course, retail stores do this all the time. Take any “Marketing 101” course, and one of the first tactics you’ll learn is how to use targeted sales to lure customers who will stay to buy other goods—often negating their initial savings. From a tax perspective, customers save when buying just about anything in New Hampshire, compared to buying it in Maine.
Add up all of these cross-border shopping trips, and you end up with a very big problem. Recent MHPC research has estimated that Maine is losing up to $2.2 billion in retail sales each and every year to New Hampshire. This has created a 40-mile desert of big-box retailers on the Maine side of the border. At the same time, big-box retailers in New Hampshire locate as closely to the Maine border as possible.
Cross-border shopping also hits state and local government coffers. Higher Maine retail sales would mean greater income, sales and property tax revenue. Higher tax revenue would enable reductions in tax rates, which would fuel more economic growth.
Unfortunately, instead of this virtuous tax cycle, Maine has a vicious tax cycle that drives Mainers to spend their hard-earned money elsewhere.
Equalizing Maine’s liquor prices would be an important first step toward taking back our economy. Without the savings from liquor, the overall incentive to shop in New Hampshire is greatly reduced, especially with today’s high gasoline prices.
At some point, Maine’s policymakers have to come to the realization that Maine’s tax policy must become competitive in at least one area. Why not start with liquor?
But wait there’s more, the Union Leader is reporting that New Hampshire’s liquor sales are soaring:
Retail sales at New Hampshire Liquor & Wine Outlets since July 1 are up $9.8 million year-to-date, an increase of 9.4 percent over the previous fiscal year.
Spirit sales increased 9.5 percent and wine sales increased 9.3 percent, according to the New Hampshire Liquor Commission.
The commission said it is seeing continued growth at new and recently relocated stores across the state. Seven state liquor stores have been relocated over the past two years as part of a goal to update them statewide. Collectively, those stores experienced $7.9 million in growth in fiscal year 2012, which ended June 30, the commission reported.
This story originated as an editorial for The Maine Wire.
This year’s HGTV 2012 Urban Oasis Giveaway is in Miami, Florida. According to the HGTV contest rules, it comes with a home and furnishings valued at $900,000–interesting, this home does not come with any cash as the recent 2012 HGTV Green Home Giveaway did ($100,000 worth).
Of course, the cash would have come in hand because if you win the dream home, be prepared for a hefty federal and state income tax bill (this analysis excludes the myriad of other taxes such as any deed or transfer taxes and, most especially, the property tax which you pay year, after year, after year . . . well, you get the picture).
Fortunately, thanks to the benefits of tax competition between the 50 states, there is no personal income tax in Florida . . . maybe that’s why they didn’t include any cash in the prize? For instance, the 2012 diy Blog Cabin Coastal Retreat is in high-tax Maine and the state income tax increased the total tax bill by 27 percent.
Nonetheless, the federal income tax bill alone comes to a whopping $274,900. If you plan on keeping the home, best be prepared to take out a home-equity loan to pay Uncle Sam.
Fortunately, HGTV does provide an escape hatch by offering $750,000 in lieu of taking possession of the home. If the winner opts for this choice, they will take home $527,701 free-and-clear after paying income taxes of $222,400.
My suggestion would be take this money and run. One could outright buy a very, very nice home with the cash and have zero debt. You could certainly buy that other home in Florida which is a pretty low-tax state. However, in Florida you would still have to deal with a sales and property tax. On the other hand, there are a handful of America’s tax havens left (all in New Hampshire) where there are no state and local income or sales taxes and very low (in some case no) property taxes.
Maine is world famous for its lobster, coastline and lighthouses. However, Maine is also infamous for its high tax burden.
Unfortunately, its not just the location of the 2012 diy Blog Cabin Coastal Retreat in Waldoboro, Maine that will create tax sticker shock for the winner. The rules of this contest leave the winner few alternatives other than to suck-it-up and pay the tax man or sell the home (and still pay the tax man). From the rules:
Real estate transfer taxes, deed recording charges and closing costs, if not the obligation of the Developer pursuant to an agreement with DIY (the “Home Contract”) to acquire the home, shall be the sole responsibility of the Grand Prize Winner, as will all future real estate taxes and other expenses related to the maintenance of the house. Title insurance and homeowner’s hazard and liability insurance shall be the sole responsibility of the Grand Prize Winner. Condition of title to home shall otherwise be as set forth in the Home Contract.
Total ARV of the Grand Prize is $699,500
All costs, taxes, fees, and expenses associated with any element of a prize not specifically addressed above are the sole responsibility of the Grand Prize Winner. All federal, state and local taxes on prize are the Grand Prize Winner’s responsibility. The Grand Prize Winner will be issued a 1099 tax form for the ARV of the Grand Prize.
Overall, the federal and state income tax bill comes to a whopping $260,827 (this analysis excludes the myriad of other taxes such as any deed or transfer taxes and, most especially, the property tax which you pay year, after year, after year . . . well, you get the picture).
It is too bad the contest is not being held in 2013 because Maine’s top personal income tax rate will drop from 8.5 percent o 7.95 percent which would save the winner some serious coin.
And unlike previous contests, such as the HGTV 2012 Green Home Giveaway or the HGTV 2012 Dream Home Giveaway, there is no escape clause that will let you take cash in lieu of the home. So you are stuck with the home and the tax man . . . have fun!
OK, I couldn’t resist . . . how many times will I ever get the chance to write about economics and football. Even better, this pertains to my favorite football team–the Carolina Panthers–and their new franchise quarterback–Cam Newton.
In the clip below, Stephen J. Dubner (co-writer of Freakonomics), discusses the probability of Cam Newton becoming a franchise quarterback. And what I like about the discussion is that, like economics, success often cannot be quantified. Despite the fact that prospective NFL players are endlessly measured, studied, and analyzed, those that succeed have one trait in common–the unquenchable desire to win.
Yet, how do you measure that desire? Talent evaluators can only go by their gut feeling on that one. The same is true of entrepreneurship. How do you measure entrepreneurship? If you lined up Steve Jobs or Bill Gates at age 15, would you have picked them out as the next multi-billionaires? So how do NFL teams find their franchise quarterback and not the next Ryan Leaf?
In hindsight, Cam Newton appears to be the rarest of NFL players with not only a unique set of physical skills, but also the burning desire to win. Yet, it was the desire that was most in question. Now we know the answer since Cam broke so many records in his rookie season that the stats almost seem gaudy:
- Most passing yards in a season by a rookie (4,051)
- First rookie to throw for 10 touchdowns and rush for 10 touchdowns
- Most total touchdowns by a rookie (21 pass, 14 rush)
- Most rushing yards by a rookie quarterback: 706
- Most rushing touchdowns by any quarterback: 14
And I could go on, but you get the point. While the Panthers finished with a 6-10 record last year, I attribute that almost entirely to an injury-riddled defense. The defense, barring injuries, will be much improved this year. I’m going to go out on a limb and say the Panthers will make the playoffs this year, though most likely as a wild-card. At the same time, Cam Newton and company will evolve into one of, if not the, premier offense in the NFL–”Are you ready for some football?”
Hat tip to Cat Scratch Reader
While I haven’t had a chance yet to read Mark Steyn’s new book “After America,” from what I’ve read and heard about it he is right on. Below is a 10 minute interview that he did with Sun News that does an excellent job of summarizing his positions. BTW, Mark Steyn lives in New Hamsphire . . . where America’s few remaining tax havens still exist.