America’s Highest Sales Tax?

Two votes could result in the highest sales taxes

Oklahoma could soon have the highest average sales tax rate in the nation and Tulsa could have the third highest rate among major American cities.

On April 5, Tulsans will vote on a proposal to raise $884,100,000.00 in new sales tax. A statewide initiative petition also is being circulated for a one-cent statewide sales tax increase for education. If successful, that petition could be on the November election ballot.

According to the Tax Foundation, Oklahoma currently ranks No. 6 among states with high sales tax averages (a combination of state, municipal and county sales tax).

If both the Tulsa and state sales tax increases pass, Oklahoma would have the highest average sales tax in the nation at 9.77 percent.

In figures from a 2012 study, the foundation showed Tulsa ranked No. 23 among major cities (populations of 200,000 or more) in terms of sales tax rates. If the city and state sales tax rates increase votes are successful, Tulsa would have the third highest sales tax (9.517 percent) in the nation (behind Birmingham and Montgomery, Alabama, both with 10 percent.

“The tax monsters are awake and coming for more of your money,” Ronda Vuillemont-Smith, president of the Tulsa 912 Project, wrote in an e-mail. “The cities of Tulsa, Jenks and Owasso are trying to recapture most of the Vision 2025 temporary tax that is set to expire December 31, 2016 – and Tulsa County is coming after the rest.

“A good part of the temporary tax money they are after will become a permanent tax. It will never, ever go away – because goodness knows, if a temporary tax never goes away, there’s not a snowball’s chance a permanent tax would ever get lowered.

“We live in uncertain times and we know that David Boren’s proposed one-cent permanent sales tax will be on the ballot in November. If it passes it will make us one of the highest, if not the highest taxed counties in the country. When will the madness end? Look closely at what your city/county wants to spend your money on.”

According to the Tax Foundation, the five states with the highest average combined state-local sales tax rates are Tennessee (9.45 percent), Arkansas (9.19 percent), Louisiana (8.89 percent), Washington (8.88 percent), and Oklahoma (8.72 percent). Virginia, Arkansas, Ohio and Maine have recently raised sales tax rates. Arizona, Kansas and the District of Columbia have recently cut sales tax rates.

According to the foundation, 45 states collect statewide sales taxes and 38 states collect local sales taxes.

The five states with the highest average local sales tax rates are Alabama (4.91 percent), Louisiana (4.91 percent), Colorado (4.54 percent), New York (4.48 percent), and Oklahoma (4.27 percent).
Many cities and counties in Kansas increased local sales taxes last year, bringing the state from 12th to 9th in the ranking of the highest combined state-local rates. In November of 2014, residents of the state’s largest city, Wichita, voted down an initiative to approve a five-year, 1 percent citywide sales tax that would support a bus route expansion and a “jobs development fund.”

High sales taxes drive customers away, according to the foundation.

“Avoidance of sales tax is most likely to occur in areas where there is a significant difference between two jurisdictions’ sales tax rates. Research indicates that consumers can and do leave high-tax areas to make major purchases in low-tax areas, such as from cities to suburbs. For example, evidence suggests that Chicago-area consumers make major purchases in surrounding suburbs or online to avoid Chicago’s 9.25 percent sales tax rate,” the foundation website reports.

“At the statewide level, businesses sometimes locate just outside the borders of high sales tax areas to avoid being subjected to their rates. A stark example of this occurs in the Northeast, where even though I-91 runs up the Vermont side of the Connecticut River, many more retail establishments choose to locate on the New Hampshire side to avoid sales taxes. One study shows that per capita sales in border counties in sales tax-free New Hampshire have tripled since the late 1950s, while per capita sales in border counties in Vermont have remained stagnant.

“The state of Delaware actually uses its highway welcome sign to remind motorists that Delaware is the “Home of Tax-Free Shopping.” State and local governments should be cautious about raising rates too high relative to their neighbors because doing so will amount to less revenue than expected or, in extreme cases, revenue losses despite the higher tax rate.”

And a high sales tax rate can have a harsher effect on the poor when a state – like Oklahoma – doesn’t exempt groceries from sales tax. The Tax Foundation states that most states charge no tax on groceries and other charge a lesser rate than on other products.

In July of 2014, councilmembers in the District of Columbia voted to expand D.C.’s sales tax base to include previously untaxed services such as car washes, carpet cleaning and bowling alleys. The expansion also brought fitness services under the sales tax umbrella, prompting health clubs and training studios to label the measure a “fitness tax” or “yoga tax.”

Oklahoma is experiencing a budget shortfall of between one and two billion dollars and Gov. Mary Fallin and state lawmakers are considering charging sales tax on services. No specifics have been announced.

Some states, like Washington, have high sales tax but no state income tax. Oregon has no sales tax but high income taxes.

If Tulsa’s $884,100,000.00 sales tax increase passes on April 5 and state voters approve a one-cent increase in state sales tax, Oklahoma will have one of the highest combinations of sales taxes and state income taxes (5 percent).

Combined State, Local Sales Tax Rates (2015)

  1. 9.45% Tennessee
  2. 9.26% Arkansas
  3. 8.91% Alabama
  4. 8.91% Louisiana
  5. 8.89% Washington
  6. 8.77% Oklahoma
  7. 8.48% New York
  8. 8.44% California
  9. 8.20% Kansas
  10. 8.19% Illinois

If Tulsa and state sales tax increases pass:

  1. 9.77% Oklahoma
  2. 9.45% Tennessee
  3. 9.26% Arkansas
  4. 8.91% Alabama
  5. 8.91% Louisiana
  6. 8.89% Washington
  7. 8.48% New York
  8. 8.44% California
  9. 8.20% Kansas
  10. 8.19% Illinois

Sales Taxes in Cities of 200,000+ (2012)

  1. 10% Birmingham, Ala.
  2. 10% Montgomery, Ala.
  3. 9.5% Chicago, Ill.
  4. 9.5% Glendale, Ariz.
  5. 9.5% Seattle, Wash.
  6. 9.3% Phoenix, Ariz.
  7. 9.25% Memphis, Tenn.
  8. 9.25% Nashville, Tenn.
  9. 9.1% Tucson, Ariz.
  10. 9.05% Mesa, Ariz.
  11. 8.517% Tulsa
  12. 8.375% OKC

If Tulsa and state sales tax increases pass:

  1. 10% Birmingham, Ala.
  2. 10% Montgomery, Ala.
  3. 9.517 Tulsa
  4. 9.5% Chicago, Ill.
  5. 9.5% Glendale, Ariz.
  6. 9.5% Seattle, Wash.
  7. 9.375 OKC
  8. 9.3% Phoenix, Ariz.
  9. 9.25% Memphis, Tenn.
  10. 9.25% Nashville,Tenn.
Sources: Sales Tax Clearinghouse, U.S. Census Bureau. Sales Tax Clearinghouse, Tax Foundation, State Revenue Department websites