Will Arizona soon see a lot more shoppers from Mexico?

Mexican border states will see a jump in sales tax on Jan. 1, potentially pushing more shoppers into the United States.

Matt York/AP/File
In this 2010 file photo, the American Flag flies along the international border between the US and Mexico in Nogales, Ariz.

On any given day, city residents here wait in long lines to cross the border and shop for bargains in Arizona. Gaby Medina is one of them. She visits the stores in Nogales, Ariz., at least twice a month to look for deals on clothes, which she says are often less expensive than in the border state of Sonora, Mexico.

Earlier this week, she filled several plastic bags with tops she bought for herself and relatives who lack a visa to visit the United States. Come January, Ms. Medina may head to the United States more frequently, she says. That's when Mexico's new sales tax will take effect, increasing to 16 percent from 11 percent in Mexico's border cities and towns.

The sales tax is part of broad fiscal reforms that President Enrique Peña Nieto pushed through with support from his Institutional Revolutionary Party (PRI) to bolster tax collection in Mexico. The government, which had allowed the reduced rate in border areas to encourage consumer shopping in Mexico, is bringing the region in line with the rest of the country. The president says the broad reforms will ensure a robust future for Mexico's development, but critics contend the law will hurt the growing middle class and jeopardize the country's economy.

Medina has her own reasons for disliking the changes.

"It's really going to affect our family budget," the mother of three says. "It would be good if people's salaries also went up to compensate for the tax increase."

The tax hikes sparked strong resistance from Mexico's conservative opposition National Action Party (PAN) as well as many businesses and citizens around the country. The final plan includes higher income taxes for top earners and places levies on soft drinks and junk food.

Some say the changes will mean more business for US merchants because of the lower sales taxes. For example, Nogales, Ariz. shoppers pay 8.6 percent tax on their retail purchases. Farther north, in Tucson and Phoenix, it is 8.1 percent and 8.3 percent, respectively.

Mexican visitors already are a boon for businesses on the US side of the international boundary. One University of Arizona study found that over a one-year period between 2007-08, Mexican shoppers spent $2.69 billion in the state.

"It's going to be good for our economy because people are going to come to Nogales, Ariz.," says Olivia Ainza-Kramer, president of the Nogales-Santa Cruz County Chamber of Commerce. "Maybe this is a good opportunity for us to create some incentives."

Medina will return to the Nogales shops soon, she says, provided the peso doesn't keep weakening against the dollar.

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