How much does the average person spend on sales tax?
In fiscal year 2021, state retail sales taxes yielded $375.3 billion in revenue and accounted for 29.52 percent of state tax collections at a tax cost of $1,131 per person. Five states—Alaska, Delaware, Montana, New Hampshire, and Oregon—forgo a state-level sales tax.
The US average is 39 percent (because most states don't tax many services). Additionally, in 2023, 18 states have sales tax holidays, where specific purchases, often clothes and school supplies right before the start of a new school year, are sold tax free for a short period of time.
Most sales tax rates range between 5% – 7%, though the rate can be as low as 2.9% or as high as 7.25%.
| State | Lifetime Earnings | % of Earnings on Tax |
|---|---|---|
| Maryland | $1,979,864 | 41.22% |
| California | $1,640,787 | 40.93% |
| Vermont | $1,576,473 | 40.86% |
| District of Columbia | $2,837,996 | 40.53% |
- California: 7.25% sales tax rate.
- Indiana: 7% sales tax rate.
- Mississippi: 7% sales tax rate.
- Rhode Island 7% sales tax rate.
- Tennessee: 7% sales tax rate.
- Minnesota: 6.875% sales tax rate.
- Nevada: 6.85% sales tax rate.
- New Jersey: 6.625% sales tax rate.
- California: 7.25% sales tax rate.
- Indiana: 7% sales tax rate.
- Mississippi: 7% sales tax rate.
- Rhode Island 7% sales tax rate.
- Tennessee: 7% sales tax rate.
- Minnesota: 6.875% sales tax rate.
- Nevada: 6.85% sales tax rate.
- New Jersey: 6.625% sales tax rate.
This can make a huge difference in how much you pay for retail items, since rates can range as high as 7.25% in California, according to research from Tax Foundation. The following five states currently have no statewide sales tax: Alaska, Delaware, Montana, New Hampshire and Oregon.
- Tacoma, Washington (10.3%)
- Chicago, Illinois (10.25%)
- Fremont, California (10.25%)
- Long Beach, California (10.25%
- Oakland, California (10.25%)
- Seattle, Washington (10.25%)
- Birmingham, Alabama (10%)
- Baton Rouge, Louisiana (9.95%)
The five states with the lowest average combined rates are Alaska (1.81 percent), Hawaii (4.44 percent), Wisconsin (5.43 percent), Wyoming (5.44 percent), and Maine (5.50 percent).
1. Bridgeport, Connecticut. It's no real surprise that one of the wealthiest cities in the U.S. also imposes some of the highest taxes. In Bridgeport, as of 2022, approximately 20% of families that live here report income of $200,000 or more.
What percentage of tax do the top 1% pay?
High-Income Taxpayers Paid the Majority of Federal Income Taxes. In 2020, the bottom half of taxpayers earned 10.2 percent of total AGI and paid 2.3 percent of all federal individual income taxes. The top 1 percent earned 22.2 percent of total AGI and paid 42.3 percent of all federal income taxes.
The average tax rate is the total tax paid divided by taxable income. While marginal tax rates show the amount of tax paid on the next dollar earned, average tax rates show the overall share of income paid in taxes.
While groceries are exempt from taxes in most of the country, seven states charge a standard sales tax rate on groceries and six impose reduced levies. This year, Kansas, Virginia, Illinois, Idaho, and Tennessee either eliminated or reduced sales taxes on groceries.
The 20% of California families with the lowest incomes pay 7.4% of their incomes in combined state and local sales and excise taxes, compared to 0.8% for the richest 1%.
California has the highest base sales tax rate, 7.25%.
- The states with the highest income tax for 2023 include California 13.3%, Hawaii 11%, New York 10.9%, New Jersey 10.75%, District of Columbia 10.75%, Oregon 9.9%, and Minnesota 9.85%.
- Seven states have no personal income tax, including Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, and Wyoming.
Portland, Oregon, and Anchorage, Alaska, have no state or local sales taxes. Richmond, Virginia has 5.3 percent state sales tax. Honolulu, Hawaii, has a low sales tax rate of 4.5 percent, but the tax applies broadly to goods and services when compared with sales tax from other locations.
Mississippi currently has the highest-taxed groceries in the U.S. The state taxes essential food items at the regular 7% tax rate. Some Mississippi lawmakers proposed reducing the grocery tax, but their efforts haven't been successful so far. Efforts to reduce the state's income tax have been more successful.
The state with the lowest property tax rate is Hawaii, giving investors even more reason to consider the Aloha State. Though their effective property tax rate is a low 0.29%, there are actually several states with property taxes under 1%.
Delaware has no sales tax, which makes buying an iPhone in the nation's first state cheaper than it is in others. The Christiana Mall is also situated just off of I-95, the main highway connecting the East Coast states.
Why is Oregon tax free?
Oregonians have had many opportunities to vote to have a sales tax, but except for very special forms of sales tax, always voted against them. Many of the things that in other states would be paid for by a sales tax are paid for by personal income tax and property tax.
Out of the five states that don't levy a sales tax (Alaska*, Delaware, Montana, New Hampshire, and Oregon), Alaska and New Hampshire rely on corporate income taxes over individual income taxes, with the opposite being true for Delaware, Montana, and Oregon.
Which Are the Tax-Free States? As of 2023, Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming are the only states that do not levy a state income tax. Note that Washington does levy a state capital gains tax on certain high earners.
Good news! Prescription drugs are almost always exempt from sales tax. The exception is Illinois, where prescription drugs are taxed at the state level, but at a reduced state rate of 1%. All drugs (prescription and nonprescription) are tax exempt at the local level.
Washington law exempts most grocery type food from retail sales tax. However, the law does not exempt “prepared food,” “soft drinks,” or “dietary supplements.” Businesses that sell these “foods” must collect sales tax. In addition, all alcoholic items are subject to retail sales tax.
