Seattle, Tacoma top U.S. in combined sales tax rates

Seattle’s tax rate now exceeds that of other large cities such as Chicago and Long Beach.

SEATTLE - Seattle now holds the highest combined state and local sales tax rate among major U.S. cities, according to a recent report on sales tax rates across the country.

As of April 2024, the Emerald City’s combined tax rate stands at 10.35%, surpassing nearby Tacoma, which has a rate of 10.3%.

The increase in Seattle’s sales tax rate is attributed to King County's decision to implement a 0.1% additional sales tax. The revenue generated from this increase is earmarked for funding nonprofits that provide cultural programming within the county. The move has sparked concern and debate among residents and local businesses.

With the cost of living already high, some residents worry the increased sales tax could further strain household budgets, particularly for low- and middle-income families.

Local business owners are also expressing concern that the high tax rate could drive consumers to shop in nearby cities with lower sales tax rates, such as Bellevue, which has a combined rate of 10.1%. This phenomenon, known as "tax avoidance," can result in decreased sales for Seattle businesses and could potentially hurt the local economy.

Tacoma's combined tax rate has been in place since 2021

Tacoma, which previously held the highest combined tax rate, now ranks just below Seattle at 10.3%. This rate has been in place since 2021, following a similar tax increase aimed at funding local services. Other Washington cities, such as Spokane, also have relatively high combined tax rates, with Spokane’s rate currently at 9%.

Washington state’s reliance on sales tax is notable, given that the state does not levy a personal income tax. This places more emphasis on sales tax as a primary source of revenue, which can lead to higher rates compared to other states. However, the absence of an income tax has its own set of trade-offs, including making the state’s tax structure more regressive, disproportionately affecting lower-income residents.

Comparisons with other major US cities

Seattle’s tax rate now exceeds that of other large cities such as Chicago and Long Beach, both of which have a combined rate of 10.25%. While Seattle’s rate is currently the highest among major U.S. cities, it is not far ahead of other cities across the country where combined rates exceed 10%.

Cities like Portland and Anchorage have no sales tax, offering a stark contrast to Seattle’s high rates. Even within Washington state, smaller municipalities or cities outside King County generally have lower tax rates, contributing to the concerns about competitive disadvantages for Seattle businesses.

Featured

Washington Supreme Court upholds capital gains tax in effort to balance state's tax code

article

Washington Supreme Court upholds capital gains tax in effort to balance state's tax code

The Washington Supreme Court on Friday upheld the state's new capital gains tax, which was adopted by lawmakers in an effort to balance what is considered the nation's most regressive tax code.

Looking ahead

The recent increase in Seattle's sales tax rate underscores the broader challenges faced by cities in balancing the need for revenue with the potential economic impact on residents and businesses. As Seattle continues to grow, the effects of this high tax rate will be closely monitored by policymakers, businesses and residents alike.

Future discussions may continue to focus on whether the benefits of the increased funding for cultural programming outweigh the potential downsides of having the nation’s highest sales tax rate. For now, Seattle's distinction as the city with the highest sales tax rate in the country serves as a reminder of the complex financial landscape that residents and local governments must navigate.