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Virginia Ranks #42 in Reliance on the Sales Tax

Thanks to the Tax Foundation last week, we learned that Virginia ranks 42nd among the states in their reliance on sales taxes. According to Morgan Scarboro, "Sales taxes are one of the largest sources of state and local tax revenue. On average, 23.3 percent of state and local tax revenues came from sales taxes in fiscal year 2014."

Compared to the average of 23.3%, Virginia's sales tax collections as a percent of total state and local tax collection in 2014 were 13.7%, ranking Virginia 42nd among the 50 states.

She explains in part:

"Combined state and local sales tax rates vary across states, with combined rates ranging from 9.98 percent in Louisiana to 5.4 percent in Wyoming. Local sales taxes are collected in 38 states. Five states do not have statewide sales taxes: Alaska, Delaware, Montana, New Hampshire, and Oregon. However, Alaska and Montana do allow localities to levy local sales taxes.

"Today’s map shows what percentage of state and local tax collections derive from the sales tax. Washington depends most heavily on the sales tax (45 percent of total tax collections) due to the lack of a corporate or individual income tax rate (although they do levy a harmful gross receipts tax in lieu of the corporate income tax). Tennessee comes in second (41 percent), again because the state does not levy an individual income tax (except on interest and dividends). South Dakota is the third most heavily dependent (40 percent). It also does not impose a corporate or individual income tax."

Importantly, she writes:

"While some think the sales tax rate is the only consideration in the sales tax code, the tax base is equally important. The economy is moving away from goods and toward services, but the sales tax is levied mostly on goods and less on services. Because of this, and exemptions of certain goods (such as groceries and prescription drugs) in the tax base for political reasons, the sales tax base is narrowing. This is harmful because as the sales tax is applied to less of the economy, the sales tax rate must increase to produce the same amount of revenue."

For the record, the first state to have a sales tax was Mississippi, and was created in 1930.

Scarboro's analysis, posted Thursday at the Tax Foundation's Tax Policy blog included the map below showing the extent that each state relies on the sales tax:


Growls readers who believe Virginia should rely less on the sales tax should take a few minutes to write to Governor McAuliffe. Click-on the following link:

Growls readers should also consider writing to their state legislators. The following legislators represent Arlington County in the Virginia General Assembly: Senators (Adam Ebbin, Barbara Favola, or Janet Howell) and Delegates (Rip Sullivan, Patrick Hope, Alfonso Lopez, or Mark Levine). Contact information for members of the General Assembly can be found here  -- use one of the "quick links" to locate the senator and delegate who represent you.

And tell them ACTA sent you.

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