Crunching the new sales tax

Governor Schwarzenegger’s proposed sales tax hike isn’t what meets the eye, says Joseph
Henchman of the Tax Foundation. The governor says that the state tax rate is
currently 5 percent, but this isn’t entirely true.

“Schwarzenegger can get away with calling the current tax ‘5 percent’
because carved out special taxes can become essentially autonomous funding
sources, like Minnesota’s new 3/8th sales tax for wildlife refuges and arts and
culture programs or Colorado’s failed 0.2% sales tax for developmentally
disabled care programs.”

The lowest sales tax rate in the state is actually 7.25 percent. In Los Angeles for example, Prop. R just bumped its sales tax from 8.25 percent to 8.75 percent, and if the Schwarzenegger plan goes through, it will be right around 10 percent.

As the old saying goes, there are lies, damn lies, and then there’s

More from the Tax Foundation here.