Tax Exporting and Seasonal Consumption Taxes

• In Event: Consumption Tax Policy at the Border

Abstract

This study presents an analysis of the potential implementation of a seasonal sales tax in Maine, focusing on its impact on state revenue and tax burden distribution. We address three key questions of interest to policymakers: the effect of various seasonal tax scenarios on overall tax revenue, the extent of tax burden shift from residents to tourists, and the potential impacts on local businesses. Our model incorporates differential price elasticities for residents and tourists, as well as seasonal spending patterns, to provide robust estimates. By combining theoretical modeling with real-world data, this research offers evidence-based insights to inform policy decisions. The findings suggest that a well-designed seasonal sales tax could potentially increase state revenue and shift the tax burden away from permanent residents and towards tourists. Our baseline estimates suggest a seasonal sales tax system could increase sales tax revenue by \$117 million per year, of which 76% of the burden would be borne by out-of-state tourists. As an overall share, tourists' burden of the total annual sales tax revenue in Maine would rise from 20.6% to 25.3%.

Authors

• Beomyun Kim, Iowa State University

• Brendan Moore