Thursday, June 20, 2024

Analysis shows Louisiana has highest combined sales tax in U.S.

by BIZ Magazine

By William Patrick | The Center Square

Louisiana has the highest combined sales tax rate in the country, according to a new midyear analysis by a national tax policy nonprofit.

The Tax Foundation analyzed state and local sales tax rates from January through June and found the Pelican State’s 9.55% combined rate was tops in the nation.

Close competitors included Tennessee (9.547%), Arkansas (9.48%), Washington (9.29%) and Alabama (9.22%).

Rate increases in Evangeline, St. Mary, Tangipahoa, West Feliciana and other assorted small parishes attributed to the uptick.

While state sales tax rates are readily available, local rates involve cities, counties, parishes and municipalities. Researchers compensated for these variables by averaging differing local government rates and weighing them by population.

The result was a 5.1% average local sales tax rate in Louisiana, that when added to the state’s 4.45% rate, leaves several million residents facing cost increases on many goods and services.

Tangible personal property items such as business equipment, furniture and automobiles are among the highest-taxed goods. A $25,000 car, for example, would cost an extra $2,387.

Groceries, prescription medicine and utilities such as electricity, natural gas and water are exempt from sales tax, according to the Louisiana Department of Revenue.

There are risks involved with exceedingly high rates, the Tax Foundation said.

“Research indicates that consumers can and do leave high-tax areas to make major purchases in low-tax areas,” the analysis said.

On that account, Texas and Mississippi rank significantly lower – 19th and 22nd, respectively.

Online purchases also circumvent aggressive sales tax efforts. Additionally, high rates can discourage consumer spending to the point of perverse consequences.

“State and local governments should be cautious about raising rates too high relative to their neighbors because doing so will yield less revenue than expected or, in extreme cases, revenue losses despite the higher tax rate,” the analysis offered.

An upside that should not be overlooked is transparency, researchers said.

Sales taxes generally are more transparent than other forms of government revenue collection, especially income taxes. Income tax brackets, graduated rates, confusing deductions and special interest carveouts are difficult for many taxpayers to follow and understand.

With sales taxes, however, they can “see their tax burden printed directly on their receipts.”

Still, high blanket rates apply to low-, middle- and top-earning Louisianans the same.

“Sales taxes are just one part of an overall tax structure and should be considered in context,” the Tax Foundation concluded, adding they “are something within policymakers’ control that can have immediate impacts.”

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