Border Tax Issues and Options
While there are constant calls for special treatment of border communities, these calls are usually rejected by state legislatures for two reasons. First, special tax concessions in border communities raise constitutional issues in many states because otherwise equal citizens and firms are being treated unequally in state policy. Second, there is no obvious place to draw the lines around such policies. For example, a border municipality might be losing 25% of possible business to another state, another municipality in the same county might be losing 10%, the whole county 12%, and a neighboring county 8%. There is a difficult issue of whether to use special border taxes just in municipalities on the border, in entire counties, etc. No matter where the line is drawn, it creates a border problem for the first county not given special treatment. If
taxes are dropped in Border County to match a neighboring state, then Near-Border County residents have a new incentive to do business in Border County.