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States raising sales taxes

If you add in local levies, the highest sales taxes are on Indian reservations. Arizona is home to 9 of the 25 localities with the highest sales tax rates.

By MSN Money Partner Feb 22, 2011 5:39PM on MSN Money
This post is by William P. Barrett of Forbes. 


President Obama's proposed budget calls for tax increases mainly on the well-to-do and rich. But many states are already raising the one big tax that falls disproportionately upon the poor.


In 2010 the average combined sales tax bite rose by a full percentage point, reaching 9.64% at the year end, according to an annual report from Vertex, which calculates sales taxes for Internet sellers. That's the highest rate since the Berwyn, Pa., firm started calculating the number in 1982 and the second year in a row that it has set a record.


The year-to-year change is noteworthy and real. But Vertex's stated average is a bit artificial and likely higher than what Americans pay on average. Vertex calculated separately the average sales tax levied by states, by counties, by municipalities and by special districts such as business improvement zones and Indian tribes, and added them together. Five states (Alaska, Delaware, Montana, New Hampshire and Oregon) have no sales tax. Nor do a huge number of counties and cities. Most people aren't on a tribal reservation, either.


Still, there's no disputing that last year was a big one for sales tax hikes. Vertex tallied 542 new sales taxes or sales tax rate increases, compared with just 52 decreases. Since there is no federal sales tax, this clearly reflects mounting budget woes at the lower levels of government -- in states, counties and municipalities.


On the state level, the highest percentage increase was in Kansas, which raised its sales tax by 19% from 5.3% to 6.3%. Arizona also raised its sales tax a full percentage point, from 5.6% to 6.6%, but since it started from a higher base, the increased hit was proportionally a bit less, 18%. New Mexico raised its rate from 5% to 5.125%, a 2.5% increase in the bite.


California again has the highest statewide sales tax rate, 7.25%. This is followed by five states at 7% --Indiana, Mississippi, New Jersey, Rhode Island and Tennessee.

On the local level, the highest city sales tax is the 7% in Wrangell, Alaska. But the Alaska Panhandle town doesn't make our list because the state doesn't have a sales tax.


We again asked Vertex to compile a list of America's worst combined sales taxes. The booby prize goes to a newcomer: Tuba City, Ariz., and environs. It's a Navajo Indian Reservation town of 8,200 on the colorful Painted Desert that sits on one of the main routes to the Grand Canyon. The levy is a whopping 13.725% -- nearly $1 on every $7 spent. It's the sum of Arizona's 6.6% tax, Coconino County's 1.125% and a tribal 6%.


Tuba City vaulted ahead of last year No. 1, a portion of Arab, Ala., where the combined sales tax actually dropped from 12% to 11%. Arab, however, remains on our list, tied for No. 9.


Named not for a musical instrument but for a local Indian chief, Tuba City is so far out there that the hit tops the second worst tax by more than 1.5 percentage points. That's found in Kayenta, Ariz., another Navajo reservation town near a big tourist draw (Monument Valley). The rate is 12.1%. Last year Kayenta ranked No. 4 when its rate was "only" 11.1%.


Indeed, as if bad press over immigration issues and Tucson violence isn't enough, Arizona has nine of the 25 entries on our worst-sales-tax list. As a tourist stopping to buy goods, you should think about this.


Politicians like sales taxes because they bring in more money than property taxes or state/city income taxes, and a portion of the bite is shouldered by people who won't vote in the next election. This is especially true of local sales taxes in areas drawing tourists and travelers. Such places account for about a quarter of the worst-tax list.


But the sales tax is not progressive. Wealthy entrepreneurs and welfare queens pay the same rate, and studies have shown the poor pay a bigger share of their income in sales taxes than do the pampered. Some states have tried to deal with this by exempting food and prescriptions from the tax.


Among the largest cities, Chicago and Los Angeles have the highest combined sales tax rates, 9.75%. Other lofty rates among big cities include San Francisco and Seattle (9.5%); Phoenix (9.3%); New Orleans (9.0%); New York (8.875%); Dallas, Houston and Charlotte (8.25%); Las Vegas (8.1%); and Philadelphia and parts of Atlanta (8.0%).


More from Forbes and MSN Money:

Tags: state tax


Feb 23, 2011 12:10AM

Disproportunate tax.  Give me a break.  You need to pay sales tax on what you buy.  Rich will by more tax.  How is this disproportunate.  People who dream up this crap need a reality check.  Heck, what we should do is take every person's paycheck and divide it equally to those who whine and sit around smoking and drinking not making anything of their life because they deserve it!

Feb 22, 2011 11:55PM

Chicagoan, you are right that your figures are unrealistic. In the first place, many places exempt food from sales tax. In the second place, states that DO charge sales tax on food can't charge poor people who use food stamps.

     Sales taxes are actually about the fairest tax there is. All taxes should be based on consumption. Forget all that BS about disproportionate share of income. Nobody is declaring bankruptcy because of their sales tax bill.

Feb 22, 2011 11:29PM
California again has the highest statewide sales tax rate, 7.25%. This is followed by five states at 7% --Indiana, Mississippi, New Jersey, Rhode Island and Tennessee.

At least get the numbers right. California's sales tax is at 9.75% right now.
Feb 22, 2011 11:00PM

I'm using unrealistic figures that are easy to calculate but let's say everyone needs a minimum of $100/month of food to survive.  The poor person makes $100 a month and the richer person makes $1000 a month.  Assume the sales tax is 10%, the poor person pays 10% or his income in sales tax and the rich person only pays 1% of his income!  Even if the rich person decided to spend 3 times the average he only pays 3% of his income in sales tax!  He only has to pay 10% when he spends 10 times the average in food consumption

Simply speaking, poor people spend most if not all of their discretionary income because they have to for food, heating, etc.....

Rich people on the other hand have a lot more money to save and invest which keeps the rich rich and poor poor.

It may seem fair that everyone pays a same person for how much they spend but for the lower end of the spectrum it's a increasingly hard burden for those who follow the rules (I say that because I think lots of people cheat the system for food stamps, heating stipends,.......)
Feb 22, 2011 10:40PM

And lets get rid of the other HIDDEN sales tax too...


Corporate taxes are nothing more than HIDDEN sales taxes, favored by the Donkey Party.

They can rail against "evil" job creating corporations, all the while using them as middle men to rape the public.  Who do you think pays Exxon's taxes?  Don't you think every nickel is in the price of a gallon of gas?  Do you think Oreo's are tax free?  Or Marlboro?


Sock it to the Rich my ****...  2012 cannot get here soon enough!  We need to fire another 3000+ Donkeys...

Feb 22, 2011 10:19PM

Let's do away with the sales tax exemption across the board for everyone and everything.  There is way to much abuse with people using this exemption, especially here in Texas.


Every time you buy something, whether it is an item or service, you pay a tax.  Schools, churches, non-profits, organizations everyone, every time, everything.  Period!


Would probably cure a lot of budget woes.  Would not have to raise anything.

Feb 22, 2011 10:18PM
Could someone explain to me how a raised sales tax is "disproportionate to the poor?"  Do poor people spend more money than middle class or wealthy?  Guess they must have more money to spend?  It is the one tax that is fair and spend it, it is taxed!   Would love to see a "fair tax"  where everyone pays 7% whether you make $1000 or $1 million....then we all would be paying our fair share!
Feb 22, 2011 10:11PM

I happen to live in Kayenta, #2 on Vertex's list.  The sales tax rate here is 5% - the sum of the Navajo tribal sales tax and the Kayenta township's levy.  All taxes are regressive, by their very nature, and this 5% applies to groceries, sadly enough.  But it’s nowhere near as regressive as 12% might be.


I'm unsure of Vertex's methodology, but I am sure of their inaccuracy.  I suspect they include Arizona sales tax and county sales taxes on top of the actual taxes we pay.  Problem is, neither Arizona or the counties can collect taxes on tribal lands.  Half the year, we’re not even in the same time zone as Arizona.  Vertex needs a reality check.


However, this article does explain why certain websites have been attempting to charge us exorbitant sales tax rates - and why we end up shopping on Amazon.


So come visit.  And buy something nice while you’re here.  We've got lots to show you - and some of the lowest sales tax rates in the nation.
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