Grib’s hand was rough. His grip was firm. They bore the marks of his concerns.

While bureaucrats and legislators in Augusta mull ways to increase his taxes, keep their raises and preserve their higher-than-average salaries, he knows high taxes hurt him and his chances here in Maine.

“Why do they tax us so much?” he says. “Pennies count. Especially when oil is costing $500 to $600 a month.”

Grib says it all. Taxes do matter.

On Saturday Feb. 9, Scott Moody, the senior economist for the Maine Heritage Policy Center, and I completed our second cross-border shopping survey talking with Grib, a young black man shopping with his fiancé in Biddeford.

Our survey is designed to gauge the tax effect on the shopping habits of Mainers. The first survey was done three weeks before Christmas. This recent survey was done in the dead of winter. The complete results will be compiled and soon made available from the MHPC.

Maine borders only one state – New Hampshire. More important, from a tax policy perspective, the Maine-New Hampshire border represents one of, if not the, largest tax differentials in the country.

The habit of cross-border shopping, we believe, is largely driven by the high tax burden in Maine.

According to the Census Bureau, in fiscal year 2005, Maine’s tax burden – tax collections as a percent of personal income – was 45 percent higher than New Hampshire’s (13 percent versus 9 percent). This enormous tax differential becomes a powerful incentive for Mainers to do their shopping in New Hampshire.

Our study started with visits to four (now seven) Wal-Marts, two Home Depots and one liquor store along the southern Maine-New Hampshire border on Saturday, Dec. 1, 2007, where vehicles with Maine license plates were counted at each store as a proxy for cross-border shoppers.

The most recent survey, on Feb. 9, confirmed the Maine habit of shopping in New Hampshire is neither seasonal, nor Christmas-related. Moody and I also checked prices for items at Wal-Mart stores in Rochester, N.H. and Biddeford. We found pricing identical. The number of cars bearing Maine license plates was also virtually the same each time.

Preliminary estimates show that Mainers save over $20 million from their habit of shopping at these stores alone. It brings to mind those GEICO insurance commercials: “I saved a bunch of money by switching to New Hampshire.”

One other thing of interest: the amount of handicap, veteran, conservation and UMaine alumni plates in New Hampshire parking lots. The quantity of these plates and their relative percentage to New Hampshire plates and to general Maine plates is surprising.

During the second survey we tallied the numbers of such plates, and we are beginning an analysis with the 2006 plate registration numbers by county. More field surveys are to be conducted periodically throughout 2008.

Many might be critical at the sheer amount of cross-border shopping that is occurring. They will express outrage that people could be so “disloyal,” “uncaring,” or “un-community-minded.” This is pure bull-wash. People behave the way they do in every case (including, altruistically) out of self-interest.

What I find most revealing about the study include the following:

1. People are creatures of habit. It’s all about choice.

Maine’s high relative sales tax, tax burden and regulatory policies are habituating Mainers to shop out-of-state, (primarily those who live near the border, in the case of cross-border shopping) and through the Internet. Habits are easy to make, but difficult to change.

Prices and taxes do matter, to some more than others, but taking aggressive action to alter such behavior is counterproductive. To use a frank analogy, stopping people from seeking relief from high taxes and regulation is like stopping teenagers from seeking sex.

It is futile, and if done severely, also damaging to the health of the family.

2. The most hurt by high taxes are not the wealthy, but the working class and the disadvantaged. The working class are most helped by government spending and taxes, because most of the money, and an increasing share, come from the wealthy, but that does not mean government spending instills good habits.

Quite the contrary. Our study proves Maine is caught in a crisis of its own making.

During the last 30 years, the public has continually elected people who believe that government can spend and tax and borrow its way to prosperity. (It cannot; taxes on Maine’s working families, which some Democrats would raise to cover the deficit, must not increase.)

This taxing and spending history, which is pushing people across the border to make ends meet, only illustrates how these policies hurt the working class the most.

We must understand, however, who benefits and who is harmed by this shopping habit. The aggrieved party – the cross-border shopper – is not who is hurting Maine and Mainers.

It is the obsessive compulsion to spend other people’s money by a bureaucratic and moribund government, which by continuing to drive spending, and thereby taxes, the government is hurting itself and its citizens.

J Dwight is a SEC registered investment advisor and an advisory board member of the Maine Heritage Policy Center. He lives in Wilton.


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