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  1. #1
    Join Date
    Nov 2005
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    Wayland MA
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    Default Question 1: No Sales Tax on Alcohol - a Calculator

    Question 1 proposes to revert the new 6.25% tax on MA alcohol sales to 5%. As pointed out by a friend of mine on Facebook:

    I will be happy one week from now when the elections are over and I don't have to see/hear advertisements from wing-nuts on the left and the right. One thing I will miss, however, is the "Vote yes on question one" campaign, to overturn the sales tax on liquor (on top of the existing excise tax).
    My friend was referring to the TV commercial in which a reluctant liquor store clerk apologizes for turning customers upside down to shake loose change out of their pockets, the coins representing the impact of the difference between the 5% and 6.25% tax rates. In the ad, a different customer farther back in the line, seeing the "shake down," cries something to the effect of, "That's it, I'm going to [tax-free] New Hampshire."

    To put it candidly, the man fleeing to NH is most likely an alcoholic, an idiot, or both.

    I put together a quick spreadsheet calculator (attached, would love it if someone would check my math, then, iPhone App?) that allows shows two calculations.

    1. The amount of alcohol one would have to purchase to make it worth driving a given distance
    2. The maximum distance one should drive to make it worth a certain alcohol purchase size


    Here's the quick summary. If you live 20 miles from NH, you need to spend $836 on alcohol to make the drive worthwhile. Alternately, if you plan to spend $100 on alcohol (that's 5-10 good bottles of wine, 4 cases of Sam Adams, or 3 decent bottles of tequila), you'd better live within 2.4 miles, or the drive is costing you more than you save.

    And remember, if you do make the trek, make sure you've got a designated driver.
    Attached Files Attached Files

  2. #2
    Join Date
    Jan 2006
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    Jeff,

    I am sorry to tell you that your calculator has been built with inaccurate data. Prior to the tax change there was no sales tax charged on alcohol because it was already subject to an excise tax. When the sales tax rate was increased from 5% to 6.25% alcohol was added to items subject to sales tax. This change means your calculator should be looking at a differential of 6.25% not 1.25%. That being said your point is still quite valid and actually the subject of a nobel prize winning study in economics from 2002. Consumers do not make rational decisions so the perceived cost of the tax actually causes much higher cost behavior (driving to New Hampshire to purchase a six-pack)

  3. #3
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    Nov 2005
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    Wayland MA
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    Default

    Ben, thanks for the important correction. When I originally constructed the calculator, I used this site as a reference. I failed to understand the last part of this sentence.

    Liquor retailers in Massachusetts indicated in late July 2009 that they were going to try to qualify the ballot measure for the 2010 ballot after the Massachusetts State Legislature increased the sales tax in the state from 5% to 6.25% and eliminated an exemption for alcohol sold in liquor stores.

    Here's the UPDATED quick summary (corrected spreadsheet attached). If you live 20 miles from NH, you need to spend $160 on alcohol to make the drive worthwhile. Alternately, if you plan to spend $100 on alcohol (that's 5-10 good bottles of wine, 4 cases of Sam Adams, or 3 decent bottles of tequila), you'd better live within 12.5 miles, or the drive is costing you more than you save.

    Where do I go to pick up my Nobel Prize? [grin]
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    Last edited by Jeff Dieffenbach; 10-28-2010 at 08:38 AM. Reason: Quip added

  4. #4
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    Default

    To put the 12.5 mile driving distance in perspective, according to Google Maps, that's almost exactly the driving distance from Lowell to the Pheasant Lane Mall that straddles the MA/NH border. I don't know if you can buy alcohol in the area of the Pheasant Lane Mall, but I'm assuming that there are a phalanx of liquor stores as close to the border as possible, waiting to reap the spoils of irrational Massachusetts drinkers.

  5. #5
    Join Date
    Dec 2005
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    Maybe I'm not thinking about this the right way, but I've always thought that "sin" taxes are quite reasonable. Drinking is an optional activity that falls under the category of entertainment (with the possible exception of the aforementioned alcoholics). The question in my mind is whether or not entertainment is the right place to collect additional tax revenues. If you think about things like life necessities (food, clothing, shelter), I would hope that the democrat that lives in most of us would agree that reducing or eliminating additional costs (read that as "taxes") on these items is reasonable. Other items (like cigarettes, liquor, gambing, etc.) should perhaps be taxed a bit more extravagantly. Of course I will get arguments that this kind of thinking restricts pleasure to the elite and creates social gaps, but hey, I think flat taxes on income are a good idea too.

    This sounds like a good topic for a debate. Maybe we should get together at a bar to discuss?

    -C

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