California’s sales tax rate not the nation’s highest, report says

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During California’s perennial tax wars, one statistic comes up constantly -- the Golden State’s 7.25% sales tax rate is the highest in the nation.

That may not actually be true, according to a new report from the Tax Foundation, a nonpartisan Washington-based group that often delves deeply into the complex world of tax policy. Though the statewide rate is the highest, the report factors in local sales taxes, which are also paid at the cash register.

Adjusted for those local rates, California has only the 12th-highest effective sales tax rate, behind Tennessee, Arizona, Louisiana and several others.

‘Retail sales taxes are a transparent way to collect tax revenue,’ the report says. ‘While graduated income tax rates and brackets are complex and confusing to many taxpayers, the sales tax is easier to understand: People can reach into their pocket and see the rate printed on a receipt.’

‘Less known, however, are the local sales taxes collected in 36 states. These rates can be substantial, so a state with a moderate state sales tax rate could actually have a very high combined state-local rate compared to other states.’

California’s sales tax dropped one percentage point last year when a temporary hike expired. Gov. Jerry Brown wants to raise it again in November by a half-cent for five years as part of a complex tax plan to patch the state deficit.

Even with that increase, California would not breach the report’s top five sales tax states. Its current effective rate is 8.13%. Oklahoma clocks in at fifth with an 8.66% rate.

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-- Nicholas Riccardi in Sacramento