Starting next week, Massachusetts residents will pay more for gas, cigarettes and computer software services. Unless, of course, they come to New Hampshire for those things.
To prevent MBTA fare hikes this year (next year, who knows?), Bay State legislators passed an $800 million transportation bill that would raise taxes by $500 million. The bill raises the cigarette tax by $1 per pack and the gasoline tax by three cents per gallon. It also applies the state sales tax to computer software services. Gov. Deval Patrick previously vetoed the bill — because it did not raise taxes enough!
The short-sightedness of this legislation is obvious. Public transit fares are user fees. They always are kept artificially low through subsidies. What Massachusetts has done is to protect public transit riders from additional fee hikes by shifting the cost for transit upgrades onto others. Thus drivers, smokers and computer users will pay to upgrade public transit they might or might not use.
That cost shifting is highly likely to produce another as more Bay Staters slip over the border to buy the targeted goods and services in New Hampshire. Massachusetts' cigarette tax will go from the ninth-highest in the nation to the second-highest. New Hampshire's tax, now $1.68 per pack, rises by a dime next month based on a law from the last legislative session. Come August, New Hampshire's cigarette tax will be $1.78 per pack; Massachusetts' will be $3.51.
The contrast is even greater with the realization that Granite State legislators rejected bills this year to further raise the state's cigarette and gas taxes.
The New Hampshire Advantage has just been made a little stronger. Thanks, Massachusetts.