Md. sales tax riddle: Why pay $11.83 to save $1?
By Maria T. Murphy
I was intrigued by the Dundalk, Md., parents who told former governor Robert L. Ehrlich Jr. that since the sales tax increase took effect under Gov. Martin O’Malley, their shopping trips to Delaware had become more frequent [“In Md., sales tax debate is a definer,” front page, Sept. 26]. It appears to me that the families are spending a great deal of time and money to save very little.
I calculated the distance from Dundalk’s center to the closest Delaware city with a big-box retail store: Newark. These cities are 61.5 miles apart and the most direct route (Interstate 95) takes about an hour and 15 minutes. Part of this trip includes tolls, but I disregarded that cost for the purposes of this calculation.
Assuming someone is driving a vehicle that averages 25 miles to the gallon and that gas is $2.56 a gallon, the gas for this 2 1/2-hour round trip will cost about $12.64. Alternatively, the closest big-box retail store to Dundalk’s city center is four miles away. At the same gas mileage, that round trip costs 82 cents in gas and takes 18 minutes.
Let’s say the consumer spends $100. In Delaware, there is no sales tax. At Maryland’s tax rate of 5 percent under Mr. Ehrlich, the consumer would have spent $5 in tax; at the O’Malley rate, they would spend $6. So, according to this example, Dundalk consumers are paying an additional $11.83 in gas and are spending an additional two hours and 12 minutes of their time in traffic to avoid paying $1 in tax.
Congratulations to Delaware for a brilliant marketing campaign that has so effectively convinced some Marylanders that they will save money by traveling there to shop.
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