Don't Mess With Taxes

A couple of weeks ago when I was whining about discussing how expensive groceries were getting, I mentioned that at least here in Texas we don't have to pay state or local sales taxes on food items, or at least what the state and localities deem as a food product.

That money-saving circumstance looks even better now, as a recent study found that 485 U.S. cities last year increased their sales tax rates.

Vertex, a tax technology company,  said that of those municipalities, 178 were newly imposed city tax rates and 307 were straight increases in existing city tax rates. This is the largest annual expansion in the number of cities who either increased their existing rate or initiated a sales tax in the past four years, according to the company's annual sales tax rate study.

North Courtland, Ala., had the largest increase nationwide, rising from a 1 percent sales tax rate to 4 percent. Seldovia, Alaska, was next, going from 2 percent to 4.5 percent, followed by Fredonia, Ariz., and Watts, Okla., with increases from 2 percent to 4 percent.

Several large U.S. cities also raised their sales tax rates between 0.1 percent and 0.2 percent in 2007. They include Boulder, Colo.; Phoenix, Ariz.; St. Louis, Mo.; and areas of Denver, Colo. and Seattle, Wash.

States with the most number of city rate increases included Colorado, Missouri, Texas and Washington.

Other findings: The report revealed that 2007 sales tax rates remained higher than any previous year among those cities increasing an existing rate, illustrating an overall steady growth in the combined state, county and city average rate since Vertex began tracking the data in 1981.

The average U.S. sales tax rate among all taxing cities, however, decreased slightly in 2007 to 8.573 percent, as compared to 8.579 percent in 2006. The reason for the incremental reduction is the number of cities initiating lower rates on first-time taxes.

Click here to peruse the latest full Vertex 2007 Sales Tax Rate Report, which provides a summary of sales tax rate changes at the state, county, city, and district levels nationwide.

Too little, too late: Apparently the finances of Vallejo, Calif., were too far gone for any increase in sales taxes to help. I previously blogged about this city's fiscal troubles back in February in Towns in Trouble.

Now it's official. The San Francisco suburb has filed for bankruptcy protection.

Economic pessimists see this as only the first shoe falling off a fiscal centipede that lived, and now will die, by our overall slowing economy and the national housing situation.

"The fiscal strains afflicting Vallejo are reverberating across the U.S., as a housing slump and slowing economy curb revenue for states and local governments. U.S. state sales-tax collections fell in the first quarter for the first time in six years," writes blogger Straight Stocks.

You can read more on Vallejo's money woes at the Associated Press, Bloomberg, the Times-Herald, the California Progress Report, the Bond Buyer and the San Jose Mercury-News.