On July 5, 2016, the Tax Foundation released a report entitled “State and Local Sales Tax Rates, Midyear 2016.” The authors, Jared Walczak and Scott Drenkard, ranked states (and the District of Columbia) by their combined state and local tax rates of the first half of 2016.
Five states do not impose statewide sales taxes: Alaska, Delaware, Montana, New Hampshire, and Oregon. Of those that do, Louisiana has highest combined sales tax rate at 9.98%. Maryland ranks towards the bottom at 38th with a combined sales tax rate of 6.00%.
Maryland’s sales tax ranking should be applauded. FSF scholars have been critical of long-standing Maryland tax and regulatory policies for several years, so it’s good to be able to commend this particular element of Maryland policy. However, as the Tax Foundation’s report states, sales taxes are fairly transparent revenue collections because consumers can see their tax burden on the receipt of every purchase they make, while the real impact of income and corporate taxes can be much more complex and murky.
The Tax Foundation published a report earlier this year ranking Maryland with the 7th highest overall state and local tax burden due to a combination of personal income tax rates, corporate tax rates, and “sin” tax rates. In other words, Maryland’s state and local sales tax rates are not the problem, although this does not mean that they could not be reduced. But in order to improve its general fiscal healthMaryland needs to reduce its personal income and corporate tax rates. If it did this, it would improve its ranking among the states with regard its overall tax burden – thereby incentivizing more entrepreneurial activity and economic growth within the state.