A new report by the nonpartisan Washington-based Tax Foundation revealed that of the major cities in the country, Chicago, Illinois and four other cities have the second-highest sales tax.
“Among major cities, Tacoma, Washington imposes the highest combined state and local sales tax rate, at 10.30 percent. Five other cities—Fremont, Los Angeles, and Oakland, California; Chicago, Illinois; and Seattle, Washington—are tied for the second highest rate of 10.25 percent,” write the foundation’s Jared Walczak and Jeremiah Nguyen.
Neither Anchorage, Alaska, nor Portland, Oregon, imposes any state or local sales taxes. Honolulu, Hawaii, has a low rate of 4.5 percent and several other major cities, including Milwaukee and Madison, Wisconsin, keep overall rates modest, the report states.
Portland, Oregon and Anchorage, Alaska have neither a state nor a local sales tax.
Fifteen major cities saw an increase of 0.25 percentage points or more in their combined state and local sales tax rates over the past two years, including eight with increases in the first half of 2021. Nearly all of these increases stemmed from ballot measures.
According to the report, “Sales tax avoidance 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, strong evidence exists that Chicago-area consumers make major purchases in surrounding suburbs or online to avoid Chicago’s high sales tax rates.”
“As expected, the report confirms a rise in cross-border shopping and other avoidance efforts as sales tax rates increase,” said Jim Tobin, economist and president of Taxpayers United of America (TUA).
“Sales taxes are like a plague of locusts,” said Tobin. “These taxes are levied not only by state governments but also by city, county, tribal, and special district governments. As the report points out, in many cases these local sales taxes can have a profound impact on the total rate that consumers pay.”