In addition to income and property taxes, Americans also pay state and local sales taxes. Sales taxes account for a large share of the levies that Americans pay each year.
To determine the states with the highest and lowest sales tax rates, 24/7 Wall St. reviewed data on sales tax rates from the Tax Foundation. States were ranked based on the combined state and local tax rates as of Jan. 1, 2022. Local tax rate is the average of all local sales tax rates within a state. All other data is from the Tax Foundation and is for fiscal 2019.
Unlike income and corporate incomes, which are taxed on a sliding scale, sales are taxed at a flat rate. Sales taxes are therefore considered a regressive levy that places a higher burden on lower-income people. Critics of sales taxes say lower-income people pay a higher share of their earnings for necessities than higher-income people. Proponents of the sales tax say it is a consumption levy that is fair and simple. (And these are the states with the highest and lowest property taxes.)
In some states, Americans pay up to 9.5% in combined state and average local sales tax. Four out of five states with the highest combined state and average local sales tax rates — 9.2% and above — are in the South: Alabama, Arkansas, Tennessee, and Louisiana. The fifth state, Washington, is one of eight states that does not have a state income tax.
Hawaii has the highest state and local general sales tax collection at $2,888 per capita.
California has the highest state sales tax rate at 7.3%, and Alabama has the highest average local sales tax rate at 5.2%.
Five states have 0% state sales tax rate: Alaska, Delaware, Montana, New Hampshire, and Oregon. Four of the five — Delaware, Montana, New Hampshire, and Oregon — also have no local sales taxes and therefore were excluded from the analysis. Alaska was included because it allows localities to charge local sales taxes. (These are the states with the largest average tax refund.)
Click here to see the states with the highest sales tax.
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