As city officials try to sell a $600,000,000.00 sales tax increase, a national study by the Tax Foundation ranks Oklahoma as having the sixth highest sales tax rate in the nation.
Mayor Dewey Bartlett, all nine city councilors and the chamber of commerce want to raise the city sales tax by .6-percent to raise hundreds of millions of dollars in new revenue for the city. A vote could come in November or next spring.
The five states with the highest average local sales tax rates are Louisiana (5.01 percent), Alabama (4.93 percent), Colorado (4.54 percent), New York (4.48 percent) and Oklahoma (4.28 percent).
In ranking states according to the biggest percentage of sales tax, the Top 10 are:
- Tennessee – 9.46 percent
- Arkansas – 9.27 percent
- Louisiana – 9.01 percent
- Alabama – 9.27 percent
- Washington – 8.90 percent
- Oklahoma – 8.78 percent
- Kansas – 8.59 percent
- New York – 8.48 percent
- California – 8.48 percent
- Illinois – 8.22 percent
The Bottom 10 are:
- Virginia – 5.63 percent
- Maine – 5.50 percent
- Wyoming – 5.43 percent
- Wisconsin – 5.43 percent
- Hawaii – 4.35 percent
- Alaska – 1.78 percent
- Delaware – 0 percent
- Montana – 0 percent
- New Hampshire – 0 percent
- Oregon – 0 percent
According to the Tax Foundation report, 45 states and the District of Columbia collect statewide sales taxes. Local sales taxes are collected in 38 states, including Oklahoma.
Five states do not have statewide sales taxes: Alaska, Delaware, Montana, New Hampshire and Oregon but Montana allow localities to charge sales taxes.
California has the highest state-level sales tax rate at 7.5 percent. Five states tie for the second-highest statewide rate at 7 percent – Indiana, Mississippi, New Jersey, Rhode Island and Tennessee.
The lowest non-zero, state-level sales tax is in Colorado, which has a rate of 2.9 percent. Seven states follow with 4 percent rates – Alabama, Georgia, Hawaii, Louisiana, New York, South Dakota, and Wyoming.
Kansas is the only state that has made any changes to its state sales tax in 2015. In June, the state adopted a sales tax rate increase. As of July 1, the statewide rate increased from 6.15 to 6.5 percent, with the state leapfrogging California and New York (both at 8.48 percent) in imposing the seventh-highest combined state and local sales tax rate in the nation.
Puerto Rico, staring down possible insolvency, recently voted for a sales tax increase, from 7 percent to 11.5 percent (including a mandatory, commonwealth-wide local rate), effective July 1. A four percent tax on professional services, previously exempt, is set to go into effect on October 1, 2015, with a transition to a value-added tax scheduled for April 1, 2016.
Louisiana legislators voted down a one-cent sales tax hike.
Alabama and Louisiana both experienced slight increases in their average local sales tax rates since the beginning of the year, but Louisiana’s rate increased faster, with the state slipping past Alabama to claim the dubious title of imposing the highest average local sales tax. Both Alabama and Louisiana impose below-average statewide rates of 4 percent but rank third and fourth highest, respectively, on combined state and local rates. North Dakota and New Mexico saw the largest average local rate increases with 0.21 percent and 0.15 percent increases, respectively.
Tax Foundation research shows 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. At the statewide level, businesses sometimes locate just outside the borders of high sales tax areas to avoid being subjected to their rates.
The state of Delaware uses its highway welcome sign to remind motorists that Delaware is the “Home of Tax-Free Shopping.” Oklahoma has a tax-free holiday weekend before the start of school that was partly in response to a similar tax-free event across the Red River in Texas.
Sales tax rates don’t tell the whole story. Most states (not Oklahoma) exempt groceries from sales tax while others exempt clothing.
Hawaii has the broadest sales tax in the United States, but it taxes many products multiple times and, by one estimate, ultimately taxes 99.21 percent of the state’s personal income. This base is far wider than the national median, where the sales tax applies to 34.46 percent of personal income.
And some states have low sales tax but higher property taxes.
“Sales taxes are just one part of an overall tax structure and should be considered in context,” the report concludes. “For example, Washington State has high sales taxes but no income tax, whereas Oregon has no sales tax but high income taxes. While many factors influence business location and investment decisions, sales taxes are something within policymakers’ control that can have immediate impacts.”