Delaware is a small state, but it plays a vital role in providing a home for most of the nation’s largest corporations. The state’s 8.7% flat corporate income tax rate leads to tax collections that are the seventh highest in the country and help allow Delaware to charge no sales tax. Nearby Philadelphia and Baltimore provide two sources of shoppers seeking tax-free purchases, but shopping malls strategically located on the Interstate 95 corridor do their best to pull in travelers from all over the East Coast.
Of all the sales-tax-free states, Oregon has the closest symbiotic relationship with its neighbor. Washington lies just across the Columbia River from Portland, and the states are near-mirror-images of each other when it comes to taxation, with Washington having a high sales tax but no income tax, while Oregon has a high income tax but no sales tax. As a result, those living in Vancouver, Wash., across the river from Portland, can structure their lives to pay relatively little in income or sales taxes, taking advantage of their proximity to Oregon shopping.
A better way to tax?
Many tax advocates believe that sales taxes are the worst way to tax residents, as their consumption focus tends to hit the poor the hardest. By that measure, these five states are most forward-thinking in their tax strategies, although they also clearly believe that they can attract some economic activity by luring shoppers in with tax-free purchase opportunities.
The article The 5 States With No Sales Tax originally appeared on Fool.com and is written by Dan Caplinger.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.