Tax on the border | Arkansas Blog

Wednesday, April 15, 2009

Tax on the border

Posted By on Wed, Apr 15, 2009 at 6:30 AM

Arkansas's solution to prevent smokers from jumping borders to buy cheaper smokes -- give preferential tax rates to border cities -- draws attention here.

This means residents in towns that do not border other states can (legally) purchase cigarettes at lower tax rates by traveling to border towns. Mark Robyn, a Tax Foundation analyst, argues that this will still probably result in a net tax revenue gain for Arkansas — since it will keep more cigarette purchases in-state — and a net revenue loss for adjacent states.

As far as I can tell, no other state has tried to stop border-shopping for cigarettes in quite the same way. Mr. Robyn notes, however, that Arkansas has put in place similarly clever laws in response to border-state income tax and border-state gas tax differentials.

The tax policy experts ought to take a look at other favors granted border cities in Arkansas, namely Texarkana. And take a look at what those advantages have done vis a vis development of sister cities across the border.


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