While the Legislature wrangles over a state income tax cut and Congress dawdles over Internet sales tax collections, Oklahoma rises to near the top in a comparison of state and local sales taxes.
Much is made of the argument that Texas, which has no personal income tax, docks its citizens in other ways. The “it’s a wash argument” plays well and rings with truth. Yet The Tax Foundation says the average combined local/state sales tax rate south of the Red River ranks 11th. Oklahoma ranks fifth, meaning that only four states have a state/local sales tax burden greater, on average, than Oklahoma.
Some states levy high income taxes, property taxes and sales taxes. Yet when it comes to sales taxes alone, Oklahoma really stands out. One reason, as we’ve noted many times, is that municipal governments depend almost entirely on the sales tax for general revenues. This isn’t true elsewhere.
It’s also the reason Oklahoma continues to tax groceries and medicines. City governments depend on this, particularly in small towns where not much but groceries is on offer.
Texas, with a state sales tax rate of 6.25 percent (compared with 4.5 percent here) exempts food. Local governments in Texas have low sales tax rates. The average is 1.9 percent, compared with 4.22 percent in Oklahoma. The combined state/local average is 8.15 percent in Texas and 8.72 percent here.
Tennessee has the nation’s highest sales tax burden at 9.45 percent, but that state has no tax on ordinary income. Oregon has no sales tax, but the state has one of the nation’s highest income tax levies.
As relatively regressive as it is, the sales tax rate in Oklahoma isn’t likely to be lowered. Groceries aren’t likely to be exempted. As relatively progressive as it is, the personal income tax is on the chopping block today in part because it’s not tied to local government finances.