Fox4KC recently aired a story about how the governor’s proposal to increase the state sales tax rate will raise the cost of groceries and cause Kansas residents to shop at grocery stores in Missouri.
Differences in tax rates across states can encourage people to vote with their feet. Caitlin Hartsell has previously discussed this on this blog. Grocery stores in Missouri probably will see more Kansas residents than they did before the sales tax hike. However, there are some factual errors in the story. The differences in tax rates on groceries between Kansas and Missouri are not as stark as Fox4KC reports, and I anticipate that the marginal increase in border-hopping grocery shoppers will be much smaller than they suggest.
The following portion of the article is just plain wrong (emphasis mine):
The one percent state-wide increase would push the tax rate on groceries in some Kansas stores to nearly nine percent. Across the state line in Missouri, there is no state sales tax on groceries, and shoppers pay less than five percent tax on grocery purchases in total.
Missouri does tax groceries. This tax rate in Missouri is 1.225 percent, and certain foods (e.g., prepared foods) are taxed at the full rate of general sales tax, which is 4.225 percent. Kansas taxes groceries at the full rate of the state sales tax, which is 5.3 percent.
The other statements relating to tax rates are true; Missouri does have lower taxes on gasoline, liquor, and cigarettes than Kansas. In the (unlikely) event that anyone besides myself is interested in comparing Missouri’s tax rates with those of Kansas and Illinois, I have organized this information in the following table:
There are additional reasons why I believe that the marginal increase will be small. First, the number of people who will cross the state border is limited to those living very close to it. The revenue loss that results from people voting with their grocery carts is small relative to the increase in revenue from grocery shoppers in the rest of the state. Second, there are extra time and transportation costs associated with crossing the state border that serve as a disincentive to shoppers. For example, Missouri and Illinois are separated by a river, so individual may not find it worth her while to make a special trip across the bridge if she will only save $0.81 on a pack of cigarettes or 0.225 percent in grocery taxes.
