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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

Forbes.com 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%).

 

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28Comments
Feb 23, 2011 12:31AM
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Get rid of the greedy politicians and we wouldnt need be taxed so much every thing you do in this country is taxed then your taxed by the states you live int the county you own ur home in taxes you again good lord jesus if there werent so many taxes in this FREE COUNTRY i think i might be considered well off. When our fore fathers started this country i dont think they had all rhis taxation in mind. Time to go to Boston Harbor and dump the Tea again. Why does this country give away so much money to foreign countries and have to borrow from other countries makes no sense. Take from the poor here and give to other countries it needs to stop take care of our own poor and stop being the worlds police maybe our defecit would start going away.
Feb 22, 2011 10:11PM
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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.
Feb 22, 2011 10:18PM
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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 equal....you 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 23, 2011 9:20AM
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This is for those who feel that the poor pay a disproportionate percentage of taxes.
#1 The top 1% earners in the US pay 40% of the taxes.
#2 You don't like being poor? Then you should have thought about that before you screwed off in school, joined a gang or decided to let the other taxpayers support you.
Feb 23, 2011 9:21AM
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No mention of McIntosh County, Oklahoma where I live. Sales taxes here were 9.2% in 2005, are now and have been for two years 10.1%, ON EVERYTHING! Includes food, clothing, utilities, you name it. On top of that, where I live, it is 20 miles to town, where gas is now $2.95, but at the only two gas stations close to us, it's $3.12, up from $ 2.85 only three weeks ago.

Food prices have gone up, while the quantities and contents have decreased substantially, some as much as 15%. And, have you looked at the taxes on your phone bills lately? Last I checked it was approaching 50% of the average monthly bill when counting all of the 'fees' that they don't call taxes. I'm now paying over $1.50 for '9-1-1 service that I don't get! I have to call the local sheriff to get a hold of the fire department or emergency services. A typical call takes up to 5 minutes on the phone before you get the service you need. Response times are in the neighbor hood of 1/2 hour to 45 minutes. A small fire discovered early one morning had spread to ten acres by the time the fire department got here. Three neighbors in separate cases died while waiting for paramedics. Yet we're still taxed for fire and medical service. And, don't get me started on SCHOOL taxes! 80% of our property and personal taxes are for schools, and we don't have any kids! Neither do any of our neighbors.

I'm ready for another TEA party!

Feb 23, 2011 8:22AM
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Studies show that the poor pay disproportionately? Rubbish! In most states, food, children's clothing, medicines and other basic necessities are not taxed. If you look at who is actually paying the sales tax, it is the middle class, the tourist, the new-caar purchaser, the teen fashionista, the consumer of taxable clothing, restaurant meals, etc. These phoney studies are like Mark Twain's "Lies, Damned Lies, and Statistics." every lobbying organization cites bogus statistics to support its claims, and the incompetent press reports the information as gospel.
Feb 23, 2011 5:26PM
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Sales tax will always be preferable over straight income tax, just to get something from those "paid under the table" people, welfare recipients, and thsoe with "non taxable" professions such as pimps, drug dealers, it is the only way to get any tax from them
Feb 22, 2011 10:19PM
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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 25, 2011 2:54AM
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@ itsourworld,
Sales tax here in Washington County, TN is 9.75%. That includes groceries, dining out, everything but prescriptions.
Our gas prices here have crept well over the $3. per gallon mark, also. This year a large vegetable garden is going in on our property, and there will be canning done to offset the cost of not only getting to the grocery store, but also offset the rising cost of foodstuff at the grocery store.
I see a busy and wonderful season ahead. That is until the govt figures out a way to tax homegrown food. Tongue out

Feb 23, 2011 10:49AM
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"This is for those who feel that the poor pay a disproportionate percentage of taxes.
#1 The top 1% earners in the US pay 40% of the taxes.
#2 You don't like being poor? Then you should have thought about that before you screwed off in school, joined a gang or decided to let the other taxpayers support you."

you forgot that the top 1% earners control 90% of the wealth in this country and plenty of these people inherited this money. 
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13 hours ago
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Disproportionate tax.  Give me a break.  You need to pay sales tax on what you buy.  Rich will by more...pay more tax.  How is this disproportionate.  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!


Math lesson here. Wall Street Banker makes $250,000,000 a year buys $100,000 of taxable goods a year. Tax rate is 10 percent Wall Street Banker pays $10,000 in sales tax. Let's see 10,000/250,000,000 is  0.004 percent of his income going towards sales tax.


Single mother of two kids makes $32,000 a year buys $8,000 of taxable goods a year at 10 percent. She pays $800 a year in tax  800/32000 is 2.5 percent of her income going towards sales tax.


Is this fair making the single mom pay 2.5 percent of her income for sales tax while the super rich Wall Street Banker is laughing all the way to the bank paying 625 times less as a percentage of his income. 


If the single mom paid tax at the same rate as the Wall Street Banker she would pay only $1.28 in sales tax. She is getting ripped off by $798.72 a year.

Feb 22, 2011 11:00PM
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Zooteacher:

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 23, 2011 11:18AM
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"#1 The top 1% earners in the US pay 40% of the taxes."
 
    =========
 
   .....Numbers, numbers numbers, what fun we can have with them.  The top 1% earners, by default, must have more income than the other 99%, i.e., they have 99% of the income, it can't be any other way, numbers don't lie.  But, this top 1% only pays 40% of the taxes!  Who pays the other 60%???   Could it possibly be the Middle Class, the working serfs who support our new age American royalty, the Upper Class?
Feb 23, 2011 11:36AM
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What a stupid story. "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." Most of those 9 cities in Arizona are on Indian Reservations. They have them that high so they can relieve the Pale Face Tourists of more of their money.

Also why should "welfare queens" expect any more of a break? All the money they are spending isn't theirs in the first place! They didn't earn a dime of it so if it is taken away in sales taxes then to bad.

The rest of the "the poor pay more in taxes" line is a bunch of BS too. How many of those poor are paying hundreds or even thousands for high end items? Or does the author of this story really think that the people that can afford nicer clothes, nicer appliances, and nicer furniture are buying their stuff from WALMART or their vehicles from Dandy Dans street corner auto lot?

 

Feb 23, 2011 11:41AM
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Just think if there was a 10 cent a stock tax for selling or buying it the government would be able to pay off it's debt in a couple of years.

This looks like something written by the CBO which, as a general rule, is instructed to make unrealistic assumptions so that it can produce the desired results.

 

If there were such a tax, all it would do would be to end flash and program trading.  It would serve mainly to cut trading volume by 80-90 percent.

Feb 22, 2011 11:29PM
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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 10:40PM
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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...

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Hmmmm,

Very interesting the politicians say they can not raise taxes on business or the rich but it seems like they are more than ready to increase the middle class taxes.  How much of  the $250,000,000 salary a Wall Street Banker gets goes to sales tax I wonder??? 

The average time a stock is held in the stock market is only 22 seconds. Most of it is the super rich buy into and sell out of fractions of cents increases or deceases during the day. Just think if there was a 10 cent a stock tax for selling or buying it the government would be able to pay off it's debt in a couple of years.
Time to organize and rebel.
The rich pay 25 percent of the taxes in America but they make 80 percent of the money.

Mar 7, 2011 9:31PM
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I'm in Texas and our sales tax is 8.25 but haven't heard of it going up, yet.   Again, blame ole bush, in 2005 when the middleclass got a tax hike and the megarich a tax break, there wasn't enough money to cover the break to the rich, so dubya passed along things to the states to pay for and has almost ruined a whole bunch of them, whether they be democratic or republican led.   The republicans don't want you to know this, I'm sure and why the democrats haven't jumped all over it, I don't know, but saw this in writing before.   We are seeing the effects of it though,  when govenors can't balance their budgets with this extra burden, they doing crazy things like blaming public workers and honest citizens and wanting them to pay for this stupidity.
Mar 7, 2011 9:48PM
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The rich hire people to find every deduction possible for them and pay a lot less tax than they should and all the loop holes and tax breaks they been getting is making them richer and richer.   Meanwhile the middleclass, those making under 100, 000 are carrying the burden, we don't have loop holes or tax breaks, only have H & R Block...lol  And the poor are getting money back that they didn't pay in, just for having kids.   Pay no tax all year and get a couple thousand back after filing a tax form....can't understand how this is possible, but it is.  I could see the poor and low income getting back what they paid in, but this is like a bonus and we middleclass are paying for that too yet, and then the breaks to the rich come out of our pockets.   Outside of a revolution, which I'm against, the only other option is to form a voter block and everyone vote for the same candidates nationally and in their state elections and local elections.   This is almost impossible as democrats don't like republicans and vice versa.   So we just bend over and let them molest us into the poorhouse and hope we can get some free money then.   
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