A ranking where Seattle just became No. 1

Okay. I sucked you in with a teaser headline. But that’s what happens in the blogging world to get traffic. Otherwise, you’d be over at YouTube watching video of the latest presidential campaign gaffes, which, I readily admit, are extremely entertaining. However, since I’m New To Seattle, you expect essays about the place where I now call home, even if the material is as mundane as rainy-day car washes or how local history repeats itself. My middle initial of P does not stand for profundity.

So here goes. As of last month, Seattle has the highest sales tax rate* of any big city in the country. You probably noticed the asterisk. That’s because there’s a tie. The 9.5% charged when you buy stuff in Seattle is the same rate charged in Chicago.

Seattle wasn’t always No. 1, even after King County voters agreed in 2008 to boost the county rate 0.5% to get the combined tab in Seattle up to 9.5%. Early last year, the top spot among the U.S.’s largest cities belonged jointly to Chicago and Los Angeles, at 9.75%. But then California whacked a full percentage point off its rate. On January 1, 2012, Cook County, where Chicago is located, cut its rate a quarter-percent. Ergo the new top-dog tie between the Emerald City and the Windy City, a dead heat that hasn’t gotten a lot of attention around Puget Sound.

I know about this because at my day job as a Senior Editor at Forbes, where I often write about taxes. We just posted our annual list of the 25 worst sales tax bites in the country. Don’t worry; Seattle isn’t on it and won’t be even if Gov. Chris Gregoire gets her way to temporarily raise the sales tax a half-point. The cut-off for the Forbes list, No. 25, is 10.85%.

But a rise to 10% would give Seattle No. 1 all to itself among big cities. At least you wouldn’t need a calculator any more to figure the tax on a purchase. Just move the decimal point one place to the left, and voila!

By and large, the venues of the Forbes 25 are places with small populations. Also, they tend to be in Arizona. The top rate, a whopping 13.725%, is found in Tuba City, Ariz., a Navajo Indian Reservation town with all of 8,200 residents. That’s $6.86 on a $50 purchase (the hit in Seattle would be $4.75). Like many place with high sales taxes, Tuba City, which sits along a major route to the Grand Canyon, counts on tourists who don’t vote locally to shoulder much of the burden. No. 2, at 12.7%, is a small portion of another Indian reservation closer to the Mexican border.

Hey, I can almost hear now the righteous screaming of Seattle’s Convention and Visitors Bureau, whose main mission in life seems to be downplaying the city’s annual rainfall. “Whadayamean we’re the worst? How about St. Louis and Birmingham?!”

All right. In a few parts of St. Louis sitting in development districts, the rate is 10.491%. But over the city generally–my metric–the rate is 8.491%.  Yes, Alabama’s largest city hits shoppers with a 10% rate. But seriously. Birmingham’s population is only 210,000, barely one-third of Seattle’s 610,000. Hardly in the same big-city league.

There is more than a hint of irony hypocrisy in Seattle’s lofty sales tax. The success of one of the city’s best-known companies, Amazon.com, is due in large part to its business model of selling goods sales-tax-free to buyers in other states–often in violation of their laws.

In my judgment, there is one big reason why Seattleites–the better-heeled ones, anyway–have little to complain about on the sales tax front. They still don’t pay a state income tax, which is found in all but seven states and extracts a whole lot more money. These rates can go as high as 11%–like the one in neighboring Oregon, which kicks in at just $250,000 of taxable income. (For federal taxes, it takes $388,350 to throw you into the top bracket.) The lack of an income tax is the main reason why Washington State has perhaps the country’s least progressive tax structure. That means the poorer you are, the more of your meager income you cough up in state taxes.

Of course, Oregon is one of five states that don’t have a state sales tax. And that underscores the trade-offs among various schemes of taxation. Since governments need a certain amount of money to run things, they get you one way or the other.

Besides a high sales tax, Washington State in general, and Seattle in particular, play this nickel-and-diming with any number of variations. Property taxes aren’t low. Unusual levies abound, such as a business personal property tax. And when a home is sold in Seattle, the seller pays a 1.78% excise tax–$8,900 on a $500,000 deal, even a short sale sold at a loss. I think it’s called an excise tax as an abbreviation because taxpayers and their real estate agents get so exercised about it.

You can now turn to the presidential candidate blooper reel. This week’s features include “I’m not concerned about the very poor” and “I was just a historian for Fannie Mae.” Not taxing to watch at all.

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A ranking where Seattle just became No. 1 — 9 Comments

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