Ronald J. Hansen

The Republic | azcentral.com

Arizona's sales-tax rate is the 11th-highest in the nation, a national analysis of state and local tax systems finds.

At 8.25 percent on average, Arizona's sales-tax rate narrowly trails California's and is well behind Louisiana's. Four states do not charge state or local sales tax.

The Phoenix area had the 24th-highest average sales tax among metro areas with at least 200,000 residents. The Chicago area had the highest average sales tax, at 10.25 percent.

The mid-year estimates are tied to population within ZIP codes and their associated sales-tax rates. The work was produced by the Tax Foundation, a nonpartisan research group that generally supports low taxes.

"This really is a reflection of the preferences by our policymakers over the last 20 years," said Dennis Hoffman, director of the L. William Seidman Research Institute at the W.P. Carey School of Business at Arizona State University. Individual income tax rates have fallen about 35 percent in that time, he said, while initiatives have tacked on sales tax charges to raise needed revenues.

"People certainly aren't happy with it, but (sales tax) is the least of all evils," Hoffman said.

Arizona's relatively high sales tax is at odds with its efforts to cultivate a reputation as a low-tax state, and reflects government's need for revenue from some source as others are trimmed. Much of Arizona's tax-cutting of the past 25 years has focused on corporate taxation and income taxes.

What makes Arizona's sales tax even more notable is that the state relies so heavily on it, said Jared Walczak, a policy analyst for the Tax Foundation.

"Sales tax is a much more significant part of the state's overall tax picture," he said.

Sales tax only one part of the picture

Sales tax is only part of the patchwork of taxes that hit consumers. State and local governments rely on varying combinations of income, corporate, property and sales taxes. In addition, fees and the federal tax system also cut into spending power.

Last year the Tax Foundation ranked Arizona 24th in the nation for its overall tax climate.

That measure looked not only at tax rates, but also at the structure of taxes as well, Walczak said. For that reason, Arizona ranked 49th in sales tax because it is designed in a way that encourages businesses to embed the tax in their pricing at multiple levels, he said.

Arizona's tax standing is helped in the Tax Foundation's rankings because the state has especially low unemployment taxes charged to business owners and has more favorable taxes on income and property.

Walczak said Arizona's sales tax was relatively broad, which would make it less onerous on the poor than many states' sales taxes. Hoffman disputes that, saying the sales tax doesn't apply to services and doesn't exempt the poor. That keeps the rate relatively high for goods in a way that falls especially hard on those with lower incomes.

Sales taxes have for years been the preferred way of addressing cash shortfalls for states. That trend continues.

Louisiana, for example, responded to the collapse of oil and gas prices by raising its sales tax 1 percentage point to the highest average level in the nation, according to the Tax Foundation's analysis. South Dakota has also raised its sales tax as energy revenues have fallen.

Arizona's reliance on the sales tax and its appetite for tax cuts seems unlikely to change in the near term.

MORE:Tax cuts have left Arizona short on cash

Gov. Doug Ducey has said he wants to cut the state's income tax rate to as close to zero as possible. Lawmakers are expected to take steps in the next year to extend a portion of the state's sales-tax collections that is earmarked for public education as part of Proposition 301.