If you haven’t been living under a rock for the last two days, you’ve probably noticed that the internet is losing its mind over the infamous dress that’s seen by some as black and blue and by others as white and gold....
- The Tax Policy Blog
- California Sales Tax Back in the Spotlight: LA and SF Wou...
California Sales Tax Back in the Spotlight: LA and SF Would Have Double-Digit Rates
During the summer, Governor Schwarzenegger proposed a temporary sales tax hike to close the expected budget gap, but he settled for other reforms when opposition was fierce to raising the state's highest-in-the-nation sales tax. Now budget projections show a larger gap, so he's back, this time with a larger tax hike.
Instead of an additional 1 percent, he wants 1.5 percent, a hike that he would like to expire after three years. It's accompanied by several other taxes and a host of new spending cuts as well.
But the sales tax is the big provision. If enacted as proposed, it would put Los Angeles and San Francisco into double digits when their local rates are tallied. LA's sales tax just went up from 8.25% to 8.75% with Prop R's passage on Tuesday. Under Schwarzenegger's plan it would go to 10.25%, tying Chicago for the nation's highest rate (aside from a few small resort towns and college towns). San Francisco would end up at 10%.
As we've written before, a better approach to raising the revenue would be to apply the current rate to goods and services that are currently exempt. The governor's plan does some of that so-called base broadening, but the biggest exemption, groceries, isn't mentioned. Taxing groceries is routinely criticized as hard on the poor, but in fact food stamps solve most of that problem. Those could be expanded if necessary, and still the tax on groceries would raise between $4 and $5 billion a year. California tax scholar Annette Nellen, a favorite of liberal-leaning think tanks, has written along the same lines.
Subscribe to the Tax Foundation Newsletter
We will never sell or share your information with third parties.
Join the Tax Foundation's fight for sound tax policy Go
About the Tax Policy Blog
The Tax Policy Blog is the official blog of the Tax Foundation, a non-partisan, non-profit research organization that has monitored tax policy at the federal, state and local levels since 1937. Our economists welcome your feedback. If you would like to send an e-mail to the author of a blog post, please click on that person's name to locate his or her e-mail address or visit our staff page here.