Monday, October 26, 2020
Hawai'i Free Press

Current Articles | Archives

Friday, September 23, 2011
If GE Tax were a Sales Tax, It would be among Nation's Lowest
By News Release @ 3:43 PM :: 8222 Views :: Maui County, Education K-12, Energy, Environment, National News, Ethics

Ranking State and Local Sales Taxes

Introduction

Retail sales taxes are often the most transparent way to collect tax revenue. Indeed, while many citizens do not know the standard 10, 15, 25, 28, 33 and 35 percent federal personal income tax rates, they tend to have at least some idea of the sales tax in their state, or could reach into their pocket to pull out a receipt with the rate printed on it.

However, almost three-quarters of the states have some presence of local-option sales taxes that may be less known to residents, with rates varying from county to county. This report provides a population-weighted average that reflects incidence of general sales taxes per state. These calculations answer the question: "If I walk out of my house and buy something, what is the average sales tax I will pay?"

Combined Rates

Five states do not have a statewide sales tax: Alaska, Delaware, Montana, New Hampshire and Oregon. Four of these five (all but Alaska) do not allow localities to charge a local sales tax. In Alaska, high local rates in populous places like Juneau and Kodiak (5 and 6 percent, respectively) certainly increase the average local rate, but not enough to give Alaskans a higher combined rate than any state that charges a statewide rate.

Among states that do collect a statewide tax, the five with the lowest average combined rates are Hawaii (4.35 percent), Maine (5 percent), Virginia (5 percent), Wyoming (5.34 percent), and Wisconsin (5.43 percent). The five highest combined rates are Tennessee (9.43 percent), Arizona (9.12 percent), Louisiana (8.84 percent), Washington (8.79 percent) and Oklahoma (8.66 percent).

The highest total sales tax burden in the United States is in Tuba City, Arizona, which has a combined rate of 13.725 percent.1[ This rate is composed of a 6.6 percent state tax, a 1.125 percent Coconino county tax, and an additional 6 percent tribal tax levied by the To'Nanees'Dizi local government.

  *   *   *   *   *

UPDATE: A Sales Tax Word of Warning in Hawaii, New Mexico, South Dakota, and Wyoming

There are two caveats, and regrettably, they were left out of the initial release of the report (we corrected the omission shortly after the report's release). One affects just one state: Montana, which has no state sales tax, does have resort sales taxes in select towns. Unfortunately, collections data is not available from those towns for us to calculate a rate.

The other caveat is much more important, and affects Hawaii, New Mexico, South Dakota, and Wyoming. These states have broad-based sales taxes that are so unlike other states' sales taxes that many experts in those states consider them different kinds of taxes altogether. For example, most states do not apply the sales tax to services or many business-to-business transactions, but those four states sweep most of those in.

Earlier this year, Professor John Mikesell of Indiana University estimated that sales taxes in the United States on average apply to about 40 percent of the economy. That is, 40 percent of personal income is subject to sales tax. In the four states noted, the percentages are significantly higher: New Mexico (60% included in tax base), South Dakota (67% included in tax base), Wyoming (99% included in tax base), and Hawaii (108% included in tax base). Hawaii in particular is astonishing as that means the tax base is larger than the economy, resulting in multiple taxation of the same product or service.

Such nuances are difficult to convey in a table or a map but are important to remember when doing interstate comparisons. So while Hawaii's combined rate is a low-sounding 4.35%, the sales tax burden on residents is the third highest in the country ($2,043 per person per year, as against an average of $1,005).

  *   *   *   *   *

Table 1: State and Local General Sales Tax Rates as of July 1, 2011

State
State Tax Rate
Average Local Tax Rate
Combined Rate
Rank
Alabama 4.00% 4.64% 8.64% 6
Alaska None 1.74% 1.74% 46
Arizona 6.60% 2.52% 9.12% 2
Arkansas 6.00% 2.50% 8.50% 7
California (a) 7.25% 0.88% 8.13% 12
Colorado 2.90% 4.58% 7.48% 15
Connecticut 6.35% None 6.35% 31
Delaware None None None 47
Florida 6.00% 0.65% 6.65% 29
Georgia 4.00% 2.87% 6.87% 23
Hawaii (b)
4.00% 0.35% 4.35% 45
Idaho 6.00% 0.02% 6.02% 35
Illinois 6.25% 2.02% 8.27% 9
Indiana 7.00% None 7.00% 21
Iowa 6.00% 0.81% 6.81% 25
Kansas 6.30% 1.96% 8.26% 10
Kentucky 6.00% None 6.00% 36
Louisiana 4.00% 4.84% 8.84% 3
Maine 5.00% None 5.00% 43
Maryland 6.00% None 6.00% 36
Massachusetts 6.25% None 6.25% 33
Michigan 6.00% None 6.00% 36
Minnesota 6.875% 0.30% 7.18% 17
Mississippi 7.00% 0.003% 7.00% 20
Missouri 4.225% 3.45% 7.67% 14
Montana (c)
None None None 47
Nebraska 5.50% 1.27% 6.77% 27
Nevada 6.85% 1.08% 7.93% 13
New Hampshire None None None 47
New Jersey 7.00% 0.03% 7.03% 19
New Mexico (b)
5.125% 2.11% 7.23% 16
New York 4.00% 4.48% 8.48% 8
North Carolina 4.75% 2.10% 6.85% 24
North Dakota 5.00% 1.38% 6.38% 30
Ohio 5.50% 1.28% 6.78% 26
Oklahoma 4.50% 4.16% 8.66% 5
Oregon None None None 47
Pennsylvania 6.00% 0.34% 6.34% 32
Rhode Island 7.00% None 7.00% 21
South Carolina 6.00% 1.14% 7.14% 18
South Dakota (b)
4.00% 1.81% 5.81% 40
Tennessee 7.00% 2.43% 9.43% 1
Texas 6.25% 1.89% 8.14% 11
Utah (a) 5.95% 0.73% 6.68% 28
Vermont 6.00% 0.14% 6.14% 34
Virginia (a) 5.00% None 5.00% 43
Washington 6.50% 2.29% 8.79% 4
West Virginia 6.00% None 6.00% 36
Wisconsin 5.00% 0.43% 5.43% 41
Wyoming 4.00% 1.34% 5.34% 42
D.C. 6.00% - 6.00% -

(a) Three states levy mandatory, statewide, local add-on sales taxes at the state level: California (1%), Utah (1.25%), and Virginia (1%). We include these in their state sales tax.

(b) Hawaii's, South Dakota's and New Mexico's sales taxes have broad bases that include many services.

(c) Due to data limitations, table does not include sales taxes in local resort areas in Montana.

Source: Tax Foundation calculations; Sales Tax Clearinghouse; 2010 Census

State Rates

California, despite a recent 1 percent reduction in its sales tax rate, still has the highest state-level rate at 7.25 percent.]2[ Five states tie for the second-highest rate of 7 percent: Indiana, Mississippi, New Jersey, Rhode Island and Tennessee.

The lowest non-zero state-level sales tax is in Colorado, which boasts a rate of 2.9 percent. Seven states follow with 4 percent: Alabama, Georgia, Hawaii, Louisiana, New York, South Dakota and Wyoming.

In addition to California, there have been two recent changes in state rates since the publication of the most recent Tax Foundation report on local sales taxes in February, 2011. On July 1, 2011 North Carolina lowered its sale tax rate by 1 percentage point to 4.75 percent, and Connecticut raised its state rate by 0.35 percentage points to 6.35 percent.

Local Rates

The five highest average local rates are in Louisiana (4.84 percent), Alabama (4.64 percent), Colorado (4.58 percent), New York (4.48 percent) and Oklahoma (4.16 percent).

Fourteen states have no local option general sales tax, but this does not always make for favorable rankings. Indiana, despite having no local general sales taxes, still ranks 21st because of a 7 percent statewide rate.

Mississippi has the lowest non-zero average local rate of 0.003 percent; attributable entirely to a 2.5 percent sales tax in the small city of Tupelo, which has a population of 34,546. ]3[ After Mississippi, the states that round out the lowest five non-zero rates are Idaho (0.02 percent), New Jersey (0.03 percent), Vermont (0.14 percent) and Minnesota (0.30 percent).

The highest local rate is 7 percent in Wrangell, Alaska, which--thanks to its small population (Census estimates 2,369 people)--does not have a substantive effect on the average local rate.

 


Methodology

Sales Tax Clearinghouse publishes quarterly sales tax data at the state, county and city level by zip code. These numbers are weighted according to Census 2010 population figures in an attempt to give a sense of incidence of sales tax rates in a particular state.

It is worth noting that population numbers are only published at the zip code level every ten years by the Census Bureau, and so the methodology in this version is slightly different than past versions of this calculation.

It should also be noted that while the Census Bureau reports population data using a five-digit identifier that looks much like a zip code, these are actually what is called a "Zip Code Tabulation Area" (ZCTA), which attempts to create a geographical area associated with a given zip code. This is done because a surprisingly large number of zip codes do not actually have any residents. For example, the National Press Building, where the Tax Foundation is located, has its own zip code solely for postal reasons.

For our purposes, zip codes that do not have a corresponding ZCTA population figure are omitted from calculations. These omissions do not likely pose a notable problem for the resultant averages though, because proximate zip code areas which do have a ZCTA population number assigned to them would capture the tax rate of whatever city the area is located in.


]1[ Vertex, Inc. Average Combined Sales and Use Tax Continues to Rise in 2011.

]2[ This number includes a mandatory 1 percent add-on tax which is collected by the state but distributed to local governments. Because of this, some sources will describe California's sales tax as 1 percent lower.

]3[ U.S. Census Bureau; Census 2010, Summary File 1; generated by Scott Drenkard; using American FactFinder; http://factfinder.census.gov>; (20 September 2011)

Attached Files

]
Links

TEXT "follow HawaiiFreePress" to 40404

Register to Vote

2aHawaii

808 Silent Majority

ACA Signups Hawaii

ALEC

Alliance Defending Freedom

Aloha Pregnancy Care Center

American Council of Trustees and Alumni

AntiPlanner

Antonio Gramsci Reading List

A Place for Women in Waipio

Astronomy Hawaii

Ballotpedia Hawaii

Better Hawaii

Blaisdell Memorial Project

Broken Trust

Build More Hawaiian Homes Working Group

ChinaTownWatch.com

Christian Homeschoolers of Hawaii

Cliff Slater's Second Opinion

Coffee Break

DeedySupport.com

DVids Hawaii

E Hana Kakou Kelii Akina

FIRE

Fix Oahu!

Follow the Money Hawaii

Frank in Hawaii

Front Page Magazine

Frontline: The Fixers

Genetic Literacy Project

Grassroot Institute

Habele.org

Hawaii Aquarium Fish Report

Hawaii Aviation Preservation Society

Hawaii Catholic TV

Hawaii Christian Coalition

Hawaii Cigar Association

Hawaii Coalition Against Legalized Gambling

Hawaii ConCon Info

Hawaii Credit Union Watch

Hawaii Crop Improvement Association

Hawaii Debt Clock

Hawaii Defense Foundation

Hawaii Family Advocates

Hawaii Family Forum

Hawaii Farmers and Ranchers United

Hawaii Farmer's Daughter

Hawaii Federalist Society

Hawaii Federation of Republican Women

Hawaii Future Project

Hawaii Gathering of Eagles

Hawaii History Blog

Hawaii Homeschool Association

Hawaii Jihadi Trial

Hawaii March for Life

Hawaii's Partnership for Appropriate & Compassionate Care

Hawaii Public Charter School Network

Hawaii Rifle Association

Hawaii Shippers Council

Hawaii Smokers Alliance

Hawaii State Data Lab

Hawaii Together

Heritage Foundation

HIEC.Coop

HiFiCo

Hiram Fong Papers

Homeschool Legal Defense Hawaii

Honolulu Navy League

Honolulu Traffic

House Minority Blog

I Vote Hawaii

If Hawaii News

Imua TMT

Inouye-Kwock, NYT 1992

Inside the Nature Conservancy

Inverse Condemnation

Investigative Project on Terrorism

Iowa Meets Maui

Jackson v Abercrombie

Jihad Watch

July 4 in Hawaii

Kahle v New Hope

Kakaako Cares

Kau TEA Party

Kauai Co GOP

Keep Hawaii's Heroes

KeyWiki

Land and Power in Hawaii

Legislative Committee Analysis Tool

Lessons in Firearm Education

Lingle Years

Malulani Foundation

Managed Care Matters -- Hawaii

Malama Pregnancy Center of Maui

Mauna Kea Recreational Users Group

MentalIllnessPolicy.org

Middle East Forum--The Legal Project

Mililani Conservatives for Change

Military Home Educators' Network Oahu

Missile Defense Advocacy

MIS Veterans Hawaii

Muslim Brotherhood in America

NAMI Hawaii

NARTH

Natatorium.org

National Christian Foundation Hawaii

National Parents Org Hawaii

National Wind Watch

New Hawaiian

New Zeal

NFIB Hawaii News

No GMO Means No Aloha

Northwest Economic Policy Seminar

Not Dead Yet, Hawaii

Now What I Really Think

NRA-ILA Hawaii

Oahu Alternative Transport

ObamaCare Abortion Hawaii

Obookiah

OHA Lies

Opt Out Today

OurFutureHawaii.com

Pacific Aviation Museum

Patients Rights Council Hawaii

PEACE Hawaii

People vs Machine

Pritchett Cartoons

Pro-GMO Hawaii

P.U.E.O.

RailRipoff.com

Rental by Owner Awareness Assn

Republican Party -- Hawaii State

Research Institute for Hawaii USA

Rick Hamada Show

RJ Rummel

Robotics Organizing Committee

Save Dillingham Airfield

School Choice in Hawaii

SenatorFong.com

Sink the Jones Act

Statehood for Guam

Tax Foundation of Hawaii

The Real Hanabusa

Time Out Honolulu

Trustee Akina KWO Columns

UCC Truths

US Tax Foundation Hawaii Info

VAREP Honolulu

Waagey.org

West Maui Taxpayers Association

What Natalie Thinks

Whole Life Hawaii

Yes2TMT