Recently, we have been able to see new district taxes implemented begin to level off. Regardless, a new report indicates that State and Local sales tax rates are at the highest levels they have ever been.
Since the pandemic began, states have been receiving a plethora of funding from the federal government that has allowed states to financially keep their heads above the water. But since COVID-19 is not as prominent as it once was, the federal government assistance states received is likely gone, and not coming back.
How Will States Make Up This?
As states have realized government funding is coming to a total close, many will use sales tax revenue to fill the gap that the federal government was filling. As the economy is approaching a potential recession, all states and municipalities will still need to maintain their budgets to stay afloat. With the prices of goods and services continuing to soar, along with extremely high-interest rates, many states feel that increasing their sales tax is the most viable option at this time.
States with the highest 2022 Sales Tax Rates
According to the Tax Foundation, the highest sales tax rate goes to the state of California, they levy a 7.25% rate for the state’s goods and services. Some close seconds to California are Mississippi, Tennessee, Rhode Island, and Indiana which all levy an even 7% sales tax for their goods and services. There are also 5 other states which are a lot lower than the states previously mentioned but are still considerably high. The following states all impose a 4% sales tax rate; Hawaii, New York, Georgia, Alabama, and Wyoming.
While all these percentages are seemingly high enough already, it would not be surprising to see them raised even higher once these states stop getting federal government assistance. The trend can be seen as only one state (New Mexico) has lowered its sales tax rate from 5.125% to an even 5%. New Mexico is also the first state to cut its sales tax rate in the last 4 years, as Louisiana was the last state to make a change, slightly cutting its rate back in 2018.
Wrap Up
As the economic tides change, we are sure to see many policy changes to try and keep the United States and its key components in check. A simple way to avoid paying a lot in sales tax is cutting back on purchases and only focusing on the essentials, however, we all know this isn’t always possible. If you need some additional help controlling your costs, speaking with your accountant or financial advisor is a great first step.