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March 15, 2010
While President Obama's push to raise federal income taxes for the wealthy gets lots of attention, the continuing upward creep in the sales tax rates imposed by state and local governments has gotten less notice.
According to Vertex Inc., which calculates sales tax for Internet sellers:
- The average general sales tax rate nationwide reached 8.629 percent at the end of 2009 -- the highest since the Berwyn, Pa., company started tracking data in 1982.
- That was up a nickel on a taxable $100 purchase from a year earlier and up nearly 40 cents for the decade.
- The highest sales tax rate in the country now stands at 12 percent.
- During 2009 seven states and the District of Columbia raised sales tax rates, with one jurisdiction -- North Carolina -- actually doing it twice.
- Only four states hiked rates in 2008 and only one in 2007.
Given state budget problems, the 2009 state sales tax increases aren't surprising, says Forbes. States have also been raising income tax rates on the wealthy and corporations, and boosting excise taxes on alcohol and tobacco. With states now facing record budget shortfalls, more tax increases seem likely.
State level sales tax generally accounts for only about two-thirds of the total sales tax bill. The rest comes from levies assessed by counties, municipalities, Indian tribes and special-purpose taxing districts funding mass transit, urban renewal and even stadiums. Among lower level jurisdictions such as counties and towns, Vertex counted 649 new or increased sales tax rates during 2009 and just 192 reductions.
The result is a wide range of combined sales tax rates across the country, says Forbes. Among big cities:
- Chicago has the highest big-city rate, 10.25 percent, but in a move forced by Cook County lawmakers, the rate is scheduled to drop on July 1 to 9.75 percent, matching that of Los Angeles.
- In New York City the total bite is 8.875 percent.
- Other high big-city rates include San Francisco and Seattle (9.5 percent), New Orleans (9 percent), Houston, Dallas and Charlotte (8.25 percent), Las Vegas (8.1 percent), and Philadelphia and Atlanta (8 percent).
Source: William P. Barrett, "'U.S. Sales Tax Rates Hit Record High,"' Forbes, March 8, 2010.
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