Cities are Finding Cash Now by Charging Additional Sales Taxes
Finding cash now that the recession is over may prove to be more difficult than previously hoped. The reason is because state and local governments have been elevating the taxes charged to consumers and little has been done to publicize it. Other issues have taken precedence in the media. Heath care policies, federal income taxes and changes in retirement planning have all become high priorities in the world of finance. The Obama administration has made waves with its focus on the above challenges, and that’s where media attention has fallen.
A study done by Vertex, Inc.
Almost without notice, state and local tax rates have gone up. Vertex, Inc. is a company that calculates sales tax for internet sellers, and it recently released its findings. The general sales tax rate nationwide was 8.6% at the end of 2009. That’s the highest it has been since the company began tracking the rate in 1982. That percentage translates into a nickel of additional tax for every $100 purchase over the past year. In 2009, seven states raised sales tax rates. Back in 2008, only four states used the tactic to bring in additional revenue, and the year before only one state made an increase. That is indicative of the state of the economy today and how desperate state legislators are to bulk up coffers. In addition to the changes in sales taxes, income tax rates for the wealthy and small businesses are also on the rise.
Cities with the highest sales tax rates
When it comes to finding places to make purchases, there are certain states that, according to Vertex, Inc., are the highest in charging sales tax. Here are the number one highest taxing locations:
- Arab, Alabama. The northeastern city with a population of just 7,500 is at the top of the list in terms of charging sales taxes. The tax rate in the city is 12%, and that is a compilation of 4% taxes going to the state, 4% taxes going to the county and 4% going to the city of Arab.
- Bellwood, Illinois. This is another suburb raising taxes in the hopes of finding cash now. It is just outside of Chicago and has a population of 20,000. The city’s sales tax rate is 11.5%. The many businesses in the area and industrial parks make sales taxation a highly lucrative decision for the jurisdiction. Add to that its proximity to O’Hare Airport and that makes it a high-return area.
- Mansfield, Arkansas. This is a notably small city with a population of just 1,100, and it is situated on just two square miles of south Arkansas. Despite its size, the sales tax rate is up to 11.125%.
- Kayenta, Arizona. Kayenta is the last city on the list of highest sales tax rate locales. It has a tax rate of 11.1%. The city is a Navajo Indian reservation town of 4,900 people, and much of their commerce comes from hotels and restaurants. It’s primarily a tourist town that takes money in from locals and vacationers.
States continue to increase taxes
State level sales taxes normally make up about 2/3rd of the total sales tax bill. The remainder of money comes from levies handed down to counties, Indian tribes, municipalities and taxing districts funding mass transit and urban renewal. Vortex, Inc. showed 649 new or increased sales tax rates last year and this year more jurisdictions most likely will utilize the tool to bring in more cash.
The recession was difficult for states and many are looking for cash now from a wide variety of different sources. Increasing sales taxes is just one of the methods being utilized to bulk up income. Without taxes, it will be difficult for budgets to be maintained, but it also will put added stress on consumers who are also still reeling from the recession.