On or before April 17, millions of Americans will file their income, property, and other taxes. Not included in the filings are sales taxes, but many Americans pay thousands of dollars each year in state and local taxes on goods purchased.
Americans pay between 2.9% and 7.25% of the price of the goods they buy in the majority of states. A few states, however, levy no sales tax whatsoever. On average, across all states, sales taxes actually account for a larger share of total revenue than either property or individual income tax.
The sales tax for many is controversial, because unlike the property tax, income tax, or corporate taxes, it is not taxed on a scale but as a flat percentage of the total assessed figure. This system is referred to as a regressive tax, because its burden is higher on lower-income taxpayers.
Critics of flat sales taxes argue that poor people for whom basic necessities like groceries represent a significantly larger share of their budget are greatly affected by sales taxes than wealthier people who spend less on necessities as a proportion of their income. Proponents of the tax suggest that a flat tax is the most just and least complex.
In addition to state sales taxes, local governments can charge their own sales taxes, which can average as high as an additional 5% in some states, and are nonexistent in others. In some of the states with the lowest statewide sales tax figure, average local taxes are among the highest. Louisiana levies a 5% statewide rate, which is less than that of the majority of states. However, the average combined state and local sales taxes in Louisiana surpass 10%.
Many states balance revenue of a number of taxes, including income, sales, and property taxes. A few states opt out of one or more major types of taxation entirely. In New Hampshire, where there is no sales tax, the state levies the highest per capita corporate taxes of any state.
To determine the states with the highest and lowest sales tax, 24/7 Wall St. reviewed sales tax rates from the Tax Foundation’s State and Local Sales Tax Rates in 2017 report. Combined sales tax figures include statewide sales tax as well as the average local sales tax for residents as of Jan. 1, 2017. Regional price parity data comes from the Bureau of Economic Analysis for 2014. Personal income per capita is also from the BEA for the third quarter of 2016. In New Jersey, the average local tax is -0.03%, because businesses in Salem County are exempt from collecting state sales taxes.
Sponsored: Find a Qualified Financial Advisor
Finding a qualified financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to 3 fiduciary financial advisors in your area in 5 minutes. Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests. If you’re ready to be matched with local advisors that can help you achieve your financial goals, get started now.