Comments about local sales tax

Last week on the Jarrod Thomas Show there was a caller suggesting some inconsistency between the data on Grand Forks sales tax and local economic events. I do not think this was an allegation of malfeasance, just that the numbers were not making sense. Sales taxes reached a record level in February of 2017, but the caller cited three factors seemingly at odds with this circumstance:

  1. The U.S.-Canada exchange rate,
  2. the retail closures imminent in Grand Forks, and
  3. the budget cuts and likely associated changes at UND.

The caller is correct that these things seems at odds with a record sales tax collection report. However, there are a few points to mention with each.

Exchange Rate

The exchange rate situation is a more complex than realized and in fact is not really the biggest issue for Canadian shoppers. The fact is the difference in tax treatment between the U.S. and Canada drives this behavior. The last estimates I generated suggested that the Canadian dollar could be at a 30% discount compared to the U.S. dollar before the bulk of the Canadian retail traffic would start to make the decision to stay at home. In addition, there are qualitative factors to the shopping experience. The Canadian shoppers like the variety of items sold in Grand Forks stores.

Retail

The retail realignment in Grand Forks could be a reason for the increased sales. If people feel certain stores are closing they may be bringing their purchases forward and “stocking up.”

UND

I think the jury is still out exactly how the budget situation at UND will impact Grand Forks. It would seem like it will not be a net positive, at least as far as a sales tax revenue measure goes, but this is a difficult path to trace.

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