The Finch Formerly Known As Gold

27 October 2007

Crossing the line

Earlier this month, Stan Geiger noted that differences in sales tax between communities in close proximity will tend to shift purchase decisions in favor of the community with the lower tax rate, all else being equal. The crux of the biscuit:

If sales taxes are hiked in Tulsa without a corresponding increase in tax rates for the surrounding cities, people will go to the surrounding cities to shop or dine out. Ergo, a unilateral tax bump in Tulsa could well backfire, dropping sales tax collections in total.

In response, I pointed out that it didn't make that much difference to me, anyway:

Of late, about the only time I need to shop outside Oklahoma City limits is when I make a pilgrimage to the New Balance store in Edmond. (Total sales tax in Edmond is 7.75 percent, versus 8.375 in Oklahoma City; on a hundred-dollar pair of shoes, we're looking at 63 cents, a bit less than what I'd spend for the gas to get there and back. I might think differently if I lived, say, north of 122nd.)

Mr Geiger counters that this is exactly the sort of thinking that gets us into sales-tax trouble in the first place:

The hair in the soup, relative to the writer's perspective, has to do with consumer spending not being limited to a single purchase on a single day. I dare say most people spend money on sales taxed items on a daily basis, in fact. Multiply 63 cents times 365 and you get nearly $230. The "it's-just-a-half-a-penny" argument loses luster when viewed in the full light of day.

I'm a single guy. When I go to the grocery store, I buy only for myself and not for, say, a family of four. Beyond the simple numbers, there are no kids involved. So I don't have to make purchase of the things kids crave, like cereals, chips, ice cream and cookies. Yet, I can scarcely make a trip [to] a grocery store without dropping 40 or 50 bucks. It's not just the food, of course. Sundries, like razor blades, mouthwash and shampoo are necessary items as well.

Well, if there were 63 cents at stake every single day, then yes, it would be worth my while to go elsewhere, all else being equal. And today's trip to the supermarket (Crest in Windsor Hills) ran $63.85, which means I paid about $4.93 in sales tax, about 70 cents a day for a week's worth. But could I duplicate this same basket of goodies in, say, Warr Acres, the nearest town with a substantial (7.5 versus 8.375 percent) tax savings, for anything close to $58.92 before taxes? I don't think so: the erstwhile Warr Acres Wal-Mart Supercenter packed its bags and moved back into Oklahoma City several years ago. There's a Neighborhood Market at 23rd and MacArthur, but it's within OKC city limits, and besides, it's a decidedly creepy place; the one on 23rd west of Pennsylvania is inexplicably much nicer. Besides, I have this weird idea that it might be nice to direct some revenue into the coffers of the city in which I actually live. (Remember when Bethany painted blue lines along the city limits?)

I like this thought experiment, though:

Now then, let's assume a magic wand was waved and Tulsa's sales tax rate was increased to but one penny more than the rates in Jenks, Bixby and Broken Arrow.

The most heavily populated part of Tulsa is south Tulsa. And south Tulsa bumps up against the 3 cities noted. With a sales tax-exposed spending range of 10 to 20 grand per year, a south Tulsa resident would be able to save $100 to $200 in taxes annually for simply crossing the city line to shop and dine. I think most people would be willing to take a little drive to save that kind of money — fuel costs and inconvenience notwithstanding.

This example makes sense for the south Tulsa resident. It makes somewhat less sense for someone living, say, north of Brookside.

And I acknowledged as much in my Edmond example: "I might think differently if I lived, say, north of 122nd." But I'm pretty much in the center of Oklahoma City, and while I could shop at Crest stores in Edmond or Midwest City, get the same prices I get in OKC, and save half a buck in sales taxes every week, I'd end up spending $2 to $3 for the gas to get there and back. Were I shopping for a large family, to the tune of $300 a week or so, it's much more savings and pretty much the same gas, which shifts the balance considerably.

In sum: The advantage of a lower sales tax is real and tangible. I simply find it less compelling than Stan Geiger does, largely due to my own personal situation. Your mileage, of course, may vary.

Posted at 4:08 PM to Soonerland


We live in Coweta County, but my wife works across the Fayette line in Peachtree City. When she wants to stop and pick up groceries, she does it on her way home from work, at the Wal-Mart in Peachtree City.

Which has a one-cent sales tax savings compared to Coweta County.

However, we have Kroger Plus cards that enable us to fill up at the becoming-more-commonplace Kroger gas stations (the one at our nearest store looks like it should be ready to open for business any moment) at a ten-cent-a-gallon discount from whatever the base price happens to be, or generally about nine cents cheaper than the cheapest price on this side of the county.

A penny on sales tax vs. nine cents on gasoline? A bit of a dilemma, that. Of course, Kroger also has a gas station in Peachtree City, and a second one about to open that's even closer to where Chris works.

Posted by: McGehee at 11:27 AM on 28 October 2007