By Chip Brownlee
Alabama Political Reporter
A new report out this week shows that Montgomery and Birmingham have some of the highest combined sales tax rates in the country.
The non-partisan group, the Tax Foundation, which typically favors low taxes and tax cuts, published the report, which says only Long Beach, California, and Chicago, Illinois, have higher combined state and local sales tax rates than Birmingham and Montgomery.
Birmingham and Montgomery join Memphis and Nashville, Tennesee, in imposing a 10.0 combined sales tax rate.
But Birmingham and Montgomery have the highest local sales tax rates in the country, coming in at 6 percent sales tax rate, more than twice that of the local rate in Long Beach and 2 percentage points higher than Chicago, which has a 4 percent local rate.
Both Birmingham and Montgomery have 6 percent local rates and the 4 percent state rate.
The Tax Foundation report also found that people will leave high-tax jurisdictions to buy in lower-tax jurisdictions.
“Research indicates that consumers can and do leave high-tax areas to make major purchases in low-tax areas, such as from cities to suburbs,” the report says. “At the statewide level, businesses sometimes locate just outside the borders of high sales tax areas to avoid being subjected to their rates.”
The report ranked all cities and census-designated incorporated places with a population over 200,000. In the end, the Tax Foundation said their report demonstrated a rise in cross-border shopping and other tax avoidance efforts.
“State and local governments should be cautious about raising rates too high relative to their neighbors because doing so may lead to revenue losses despite the higher tax rate,” the report said.
Mobile also has a 10 percent combined sales tax rate but was not included in the report because its population, standing at about 195,000, did not reach the 200,000 threshold.