A new study from our friends at the Tax Foundation spell bad news for Arkansans: according to their findings, Arkansas has the second highest combined state/local sales tax rates in the country at 9.18%.
Our neighbors in Tennessee come in at number one with an average rate of 9.44%. It is worth noting, however, that Tennessee does not have a state income tax like we do in Arkansas. In fact, our income tax also ranks near the top amongst the 50 states at a top rate of 7%.
And by the way: our state sales tax just went up in July by 1%. Before that increase, Arkansas was ranked 33rd for overall tax climate. In fact, USA Today reports that Arkansans spent 10% of their income on state and local taxes in 2010. (This of course does not account for federal taxes, which are also burdensome)
Why should you care? Well, 1. You’re an American. But also noteworthy is that high sales taxes can influence consumer behavior:
Large differences between state and local rates can influence behavior, the report notes. Businesses may set up shop across state lines to take advantage of lower rates and shoppers may leave municipalities that charge high sales taxes for nearby ones that don’t.
And the Tax Foundation notes:
Of course, sales taxes are just one part of an overall tax structure and should be considered in context. For example, Washington State has high sales taxes but no income tax; Oregon has no sales tax but high income taxes. While many factors influence business location and investment decisions, sales taxes are something within policymakers’ control that can have immediate impacts.