Sales-Tax Escalator
The one tax that has never provoked a significant revolt keeps climbing higher.
New Hampshire’s state lines are dotted with shopping malls. The Pheasant Lane Mall’s parking lot is largely located in Massachusetts, though the mall itself sits within the Live Free or Die State. Stores cluster on the east side of the Connecticut River in New Hampshire, though the main interstate, I-91, runs along the west side of the river in Vermont. To shoppers, the reason is obvious: New Hampshire has no sales tax. As the owner of the state-line-adjacent Mall at Rockingham Park notes, you can “Shop TAX FREE all year long” at the stores “conveniently located just over the Massachusetts border.” The Pheasant Lane Mall even removed a cornerstone that would have extended a few feet over the border, avoiding contact with the state once known as “Taxachusetts.”
In recent years, consumers have had even more incentive to cross state lines in search of lower taxes. During the Great Recession in 2009, Massachusetts raised its sales tax from 5 percent to 6.25 percent; Maine followed in 2013, increasing its rate from 5 percent to 5.5 percent. Post-Covid inflation has driven up the price of goods—along with the amount of sales tax owed—even as incomes have lagged.
Since the pandemic, the cost of living has become the defining issue in American politics. Yet as inflation surged, few politicians targeted one of the most direct and controllable costs they impose on everyday purchases: the sales tax. Unlike property and income taxes, which have periodically provoked revolts, sales taxes have rarely faced organized political opposition. That helps explain why they are the one major tax category whose rates have risen almost continuously over the past century. Taken together, general sales taxes and selective sales taxes—special levies on goods such as cigarettes or rental cars—now constitute the largest source of revenue raised by state and local governments. Politicians truly concerned about the cost of living could start by reducing the one charge that most directly increases it.
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