Sales Tax Increase?
Anytime something happens on April Fool's, one must be suspicious: Was it a prank? An excellently-timed joke, planned just in time for that most merrymaking of days?
In the case of California's sales tax, it was no joke. On Wednesday, April 1, the California state sales tax officially went up one percent, to a nice, round six percent. And for certain counties with already-high sales tax rates, this bumps it up to closer to nine percent.
The sales tax increase is one leg of the governor's plan to balance the rather defunct state budget. It was (optimistically) estimated that the temporary sales tax increase would bring in well over $10 billion in additional state revenue. The budget balancing plan, put in place to solve the more-than $40 billion state deficit, relies on a nearly 50-50 split between spending cuts and tax increases.
As of right now, the "temporary" sales tax fix will only run through for the next two and a half years (July 2011), though if the governor is victorious in his quest to get Proposition A1, the Budget Stabilization Act, passed, the elevated sales tax will remain in place for one additional year, through July 2012. The election to decide on this and other measures, will take place on May 19. (In addition to the sales tax increase, personal income tax rates will also rise, in addition to vehicle licensing fees, just like former Governor Davis proposed, before being ousted in a special election.)
Depending on where you live, one percent, particularly on more expensive items, makes a big difference.
Don't be surprised to hear about more inter-city and inter-county shopping, as residents of higher sales tax area mosey over to the cities with lower penalties, er, taxes.
To figure out whether or not you should shop in your own city or in the town over, here is a simple trick: find out what your city/county taxation rate is. Then, locate the nearest city to you with a tax rate that is lower. Estimate what you might be spending on a particular shopping trip (say you are looking to remodel), and see how much more you are spending in the city with the higher sales tax rate. Then, go ahead and save that money by shopping in the less expensive locale. Hey, maybe the sales tax rate with actually help cities with lower sales tax rates! Oh, that's right, that would mean the other cities are getting the short end of the stick.
The California State Board of Equilization has provided a link by which consumers can check their new local sales tax rates. The county with the highest sales tax rates is Alameda, at 9.75%. Surprisingly, San Francisco is not the most expensive county in which it shop, as its new total sales tax rate is 9.5%. Counties with the highest sales tax rate are Los Angeles (at 9.5%), Contra Costa, San Mateo and Santa Clara (all three at 9.25%), Santa Cruz (9%), Sonoma (9%),
Marin (9%) and Fresno (8.975%).
The cities with the highest sales tax rates are in Pico Rivera and the City of South Gate (10.25%), Avalon (9.75%), El Monte (9.75%), Inglewood (9.75%), National City (9.75%), El Cajon (9.75%), Richmond (9.75%), Pinole (9.75%), El Cerrito (9.75%), Sanger (9.725%), La Mesa (9.5%), Dinuba (9.5%), Santa Cruz (9.5%), Campbell (9.5%), Selma (9.475%) and Reedley (9.475%).
The particular cities with the lowest sales tax rates are Eureka (8.5%), Placerville (8.5%), though many cities (and counties) are currently operating at an 8.75% sales tax rate, including, notably, Santa Barbara, West Sacramento, Oxnard, Pismo Beach, the City of San Luis Obispo, Fort Bragg, Salinas, Riverside County, San Diego County, Orange County and Mariposa County.
The counties with the lowest total sales tax rates are San Luis Obispo, Monterey, Merced, Mendocino, Shasta, Sierra, Siskiyou, Sutter, Glenn, El Dorado, Calaveras (jumping frogs!), Alpine, Butte, Colusa, Del Norte, Kern, Kings, Lake, Lassen, San Benito, Plumas, Placer, Mono, Modoc, Tehama, Trinity, Tuolumne, Ventura, Yolo and Yuba, all at 8.25%, followed closely by Stanislaus and Solano, at 8.375%.
Some experts have already expressed concern that the elevated levels of taxation will in fact, do more harm than good, particularly in the midst of the current stinging recession, which has hit California hard. It's basic economics: when people have less money, they're more apt to save it.
Increasing taxes, in a recession, has never been a brilliant move, and never will be.