California sales tax dips, but tax burden rises

 

“Four years ago, voters approved Proposition 30, which raised the income tax significantly on the wealthiest Californians and raised the sales tax a tiny bit on everyone,” Capital Public Radio recently recalled. “That quarter-of-a-cent increase equated to paying an additional $0.01 on a $4 coffee; $1 on a $400 television; and $100 on a $40,000 car.” But on Election Day 2016, that changed. “Voters extended Proposition 30’s income tax increases in [November’s] presidential election with Proposition 55 — but that initiative allowed the Prop. 30 sales tax hike to expire.”

The shift means California’s sales tax is the state’s only tax to be decreased this year, from 7.5 percent to 7.25 percent. As the U-T reported, “Some local jurisdictions tack on their own assessments, so residents in certain areas will still pay more than the statewide rate.” In certain parts of the state, like the San Francisco Bay Area, voters allowed substantial increases. 

From spending to taxing

Prop. 30 ushered in the so-called Schools and Local Public Safety Protection Act of 2012, as California voters threw their support behind increased spending on state education and benefits. “The act increased sales tax and income tax rates to help maintain funding levels for public schools and colleges and pay for programs for seniors and low-income families,” U-T San Diego noted. “The additional revenue also provided local governments with a constitutional guarantee of funding to comply with a new state law that shifted lower-level offenders from state prisons to county jails.”

Some municipalities, particularly in parts of the state that joined a Democrat-led initiative to hike minimum wages, opted to raise more funds. “Bay Area voters this year generously approved taxing themselves in large numbers — and they’ll feel the pinch at the cash register in 2017 as local sales taxes across Silicon Valley take effect even as a state tax expires,” according to the San Jose Mercury News. 

“As California cities struggle to fund basic city services like police, fire protection, libraries and parks, they’re increasingly turning to voters for help. And voters this year said ‘yes’ to tax hikes in at least eight Bay Area cities in exchange for fewer potholes, less traffic and more cops, including San Jose, Newark, Martinez and Pleasant Hill.”

Pension pinch

For years, public pension costs have steadily built pressure on Golden State cities. In some areas, the problem has become egregious: The city of El Monte, in Southern California, shelled out 28 percent of its general fund to pay retirement costs. “Among California’s 10 largest cities, only San Jose paid as much toward retirement costs relative to its general fund. Los Angeles spends 20 percent of its general fund on retirement costs,” the Los Angeles Times revealed. “El Monte’s outsize pension bill weighs heavily on the San Gabriel Valley city of 116,000, where half the residents were born outside the United States and a quarter live below the poverty line.” 

Meanwhile, CalPERS, the nation’s largest public pension fund, has struggled with its own imbalanced budgets. “CalPERS has 65 cents for every dollar that it needs to provide pension benefits for almost two million people,” Fox Business recently recalled. “CalPERS pension debt is roughly $164 billion and mostly likely will grow larger in coming years.” 

In an effort to come to grips with the problem, the fund reduced its forecasted return on investment from 7.5 to 7 percent. “It has been paying out $5 billion more a year in benefits than it’s receiving in contributions and investment returns, not a sustainable trend,” the Fresno Bee noted in an editorial. “With investment returns averaging 4.6 percent during the past decade, some experts urged CalPERS to reduce its forecast even more.” But that would risk pushing more California cities toward bankruptcy — or toward even higher local taxes. 

10 comments

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  1. Richard Rider
    Richard Rider 5 January, 2017, 14:01

    The U-T and this blog post understate the sales tax situation in California. The U-T asserted that “Some local jurisdictions tack on their own assessments, so residents in certain areas will still pay more than the statewide rate.” True, but misleading.

    It sounds like that higher local rate is the exception, when in reality those higher local taxes are the rule in all but the most rural counties. Often there’s a two, three or maybe even MORE local sales taxes piled on top of the 2017 state rate of 7.25%. A few cities’ add-ons raise the sales tax rate above 9%. Here’s the source to check the 2017 sales tax rates in any city or county in California:
    http://www.boe.ca.gov/app/rates.aspx?LETTER=S&LIST=CITY

    Moreover, this CalWatchDog article neglected to mention that — even with the lower sales tax rate in 2017, CA STILL has the highest statewide sales tax rate in the nation.

    Yes, California politicians and voters raised taxes over and over in 2016, but with the underfunded pension crunch bearing down on us all, we ain’t seen nothin’ yet.

    Reply this comment
  2. Standing Fast
    Standing Fast 5 January, 2017, 14:22

    More government, less prosperity.
    Less government, more prosperity.

    If you believe that the Universe is governed by the laws of cause and effect, teach this to your children and show them examples in the real world.

    Reply this comment
  3. Spurwing Plover
    Spurwing Plover 5 January, 2017, 16:38

    Taxes on Hot Air make Gore and the various eco-wackos(Greenpeace,EDF,Sierra Club,Leonardo DiCaprio,Luarie David,John Travolta,David Suzuki,Bill Nye the Nutos Guy,Etc pay taxes for shooting off their pieholes and producing Hot Air

    Reply this comment
  4. Impy
    Impy 5 January, 2017, 17:24

    The pension earnings rate should be reduced to 6%. Taxes will go up and up. There is nothing to stop it in California other than an armed revolt.The govt unions and parasites will demand higher taxes until Seiu members and illegals are beheaded at random. Never happen. Cal is fucked.

    Reply this comment
  5. Queeg
    Queeg 5 January, 2017, 18:26

    Comrades

    The tendency is toward use taxes to broaden the takings to include Thurlingens and the Franks…..Visigoths exempted….they own the State’s thriving grey market-

    The rich are taxed to the point of a potential trekking…..modern Exodus!

    Brick and mortar are hapless targets, for businesses are bad, real bad….

    Reply this comment
  6. Mike
    Mike 5 January, 2017, 18:51

    Catch the assloads on those SEIU sows. Lots of bars of soap could be supplied to the downtrooden after defatting those pigs.

    Reply this comment
  7. afrequentreader
    afrequentreader 6 January, 2017, 11:40

    A great poem, author unknown.

    Tax his land, tax his wage,
    Tax his bed in which he lays.
    Tax his tractor, tax his mule,
    Teach him taxes is the rule.

    Tax his cow, tax his goat,
    Tax his pants, tax his coat.
    Tax his ties, tax his shirts,
    Tax his work, tax his dirt.

    Tax his chew, tax his smoke,
    Teach him taxes are no joke.
    Tax his car, tax his grass,
    Tax the roads he must pass.

    Tax his food, tax his drink,
    Tax him if he tries to think.
    Tax his sodas, tax his beers,
    If he cries, tax his tears.

    Tax his bills, tax his gas,
    Tax his notes, tax his cash.
    Tax him good and let him know
    That after taxes, he has no dough.

    If he hollers, tax him more,
    Tax him until he’s good and sore.
    Tax his coffin, tax his grave,
    Tax the sod in which he lays.

    Put these words upon his tomb,
    “Taxes drove me to my doom!”
    And when he’s gone, we won’t relax,
    We’ll still be after the inheritance tax.

    Reply this comment
    • Standing Fast
      Standing Fast 6 January, 2017, 12:47

      This reminds me a little of a poem by Ogden Nash about something else entirely. Wonder who wrote it. Is it a ditty from some musical or something?

      For relief I recommend a daily dose of Charles Adams “For Good and Evil, the Impact of Taxes in the Course of History”–be sure to buy a case so you can give copies to people you know.

      Reply this comment
  8. Richard Rider
    Richard Rider 6 January, 2017, 12:43

    The CA statewide sales tax rate was raised by Prop 30 in 2012. The prop raised far more money by gouging the rich with a 13.3% state income tax (up from 10.9%). Prop 30 imposed temporary taxes, and was coming up for renewal.

    Democrat politicians wisely decided to let the QUARTER PERCENT sales tax increase under Prop 30 lapse, pushing instead to make the “eat the rich” 13.3% income tax essentially permanent. It was a no-brainer — most Californians will vote for tax increases on OTHER people. ESPECIALLY on rich people. It worked.

    Reply this comment
  9. NTHEOC
    NTHEOC 6 January, 2017, 15:24

    A “DOOMERS” dream headline! We are all doomed….blah blah blah. There is still so much more that can be taxed and Californians have no problem paying for the good life here in Cali.

    Reply this comment

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