Louisiana officially started the new budget year with the nation’s highest sales tax rate, according to a new analysis from a nonpartisan think tank devoted to tax issues.
The Tax Foundation report, which was released Tuesday, found that Louisiana’s 9.99 percent combined state and local sale tax rate edges out Tennessee (9.45 percent), Arkansas (9.30 percent), Alabama (8.97 percent) and Washington (8.92 percent) for first place. The state previously ranked 3rd in the Tax Foundation’s analysis.
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The highest tax news doesn’t come as a surprise. As legislators deliberated efforts to increase the state-level sales tax to plug a nearly $2 billion budget hole during a special session earlier this year, they were warned that the increases that were ultimately approved would push the state to the top of the sales tax rankings. Those new sales taxes kicked in on April 1.
But the Tax Foundation’s analysis, which also took into account any increases approved in other states in recent months, makes the state’s highest average ranking official as states start the new budget year.
Meanwhile, the states with the lowest average sales tax rates are Alaska (1.78 percent), Hawaii (4.35 percent), Wisconsin (5.41 percent), Wyoming (5.42 percent) and Maine (5.5 percent).
The state’s operating budget for the fiscal year that begins Friday is balanced for the time being.
When only considering the state-level rates, California topped the list at 7.5 percent, followed by Indiana, Mississippi, New Jersey, Rhode Island and Tennessee, all at 7 percent.
Louisiana’s state sales tax rate is now 5 percent, following a 1 percent hike that took effect April 1.
At 4.99 percent, Louisiana has the nation’s highest average local sales tax rate.
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The Tax Foundation’s report notes that there are several factors to consider but research indicates that many consumers will leave high-tax areas to make major purchases in low-tax areas.
“At the statewide level, businesses sometimes locate just outside the borders of high sales tax areas to avoid being subjected to their rates,” it adds.
The report doesn’t account for the often complex sets of exemptions and other loopholes that vary from state to state.
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