State Tax Rates Continue Upward

MSNBC.com reports that Vertex Inc., which calculates sales tax for Internet sellers, shows that the average general sales tax rate nationwide reached 8.629% at the end of 2009, the highest since the company started tracking data in 1982. During 2009 seven states and the District of Columbia raised sales tax rates, with North Carolina raising rates twice. In 2008, only four states hiked rates and only one in 2007.

With all of the state budget problems, the 2009 state sales tax increases aren’t too shocking, but they could continue to climb. States have also been raising income tax rates on the wealthy and on corporations and boosting excise taxes on alcohol and tobacco over the last few years.

The group reported a wide range of combined sales tax rates across the country. At the bottom: 0%, found in all of Alaska, New Hampshire and a few other states. The country’s highest rate now is 12%, in the tiny portion of Arab, AL, (population 7,500). The rest of the northern Alabama, except in no-sales-tax Marshall County, pays just 8%.

Right now Chicago has the highest big-city rate, 10.25%. But in a move forced by Cook County lawmakers, the rate is scheduled to drop on July 1 to 9.75%, matching that of Los Angeles. In New York City the rate is 8.875%. Other high big-city rates include San Francisco and Seattle at 9.5%, New Orleans at 9%, Houston, Dallas and Charlotte at 8.25%, Las Vegas at 8.1% and Philadelphia and Atlanta at 8%.

In Arizona, voters will go to the polls May 18 to pass judgment on a 1% rise in the state’s 5.6% rate for three years. If approved, the rate in Phoenix would jump from 8.3% to 9.3%. The New Orleans International Airport has a special 10.75% rate, counting on tourists dollars, while Snowmass Village, the ski resort in Colorado, levies a 10.4% sales tax.

Nationally, sales taxes in 2008 generated more revenue for state and local governments — about $450 billion, a recent Government Accountability Office report suggests — than did either property taxes ($411 billion) or personal income taxes ($310 billion).