On Wednesday, April 1st, the new temporary California sales tax increase officially took effect across the state as part of California’s new tax –and-spend state budget. The one percent increase is due to expire on either July 1, 2011, or July 1, 2012, depending on the outcome of a statewide vote on May 19, 2009 on Proposition 1A, the Budget Stabilization Act. The increase raised the rate from a minimum of 7.25% to at least 8.25% statewide.
If the proposition is approved, many of the tax increases passed in the Feb. 2009 budget package would be extended by one to two years. Also, state tax revenues would increase by about $16 billion from 2010-11 through 2012-13, according to the Proposition 1A proposal.
The tax increase that recently went into effect is the largest one-time tax increase in the state’s history. The increase will take between $1-2 thousand more per year from California families who are already struggling with everything from keeping up with car payments to putting food on the table.
Instead of repenting from overspending and government waste, 75 Democrats and 6 Republicans in the state legislature, along with Governor Schwarzenegger, voted to empty out the already thin pockets of Californians. Once again, state bureaucrats have dug a hole and California citizens are being forced to fill it.
The increase will raise the rate higher than 8.25% in some California counties, according to the Los Angeles Times. City and county level tax increases are added on to the one percent increase. For some Californians the sales tax has been pushed over nine percent, and in Pico Rivera, CA and South Gate, CA, people began paying a 10.25% sales tax on April 1st. The argument is that these people in cities with higher taxes can afford to pay them. According to citytowninfo.com, Pico Rivera, CA is in the lower half of both cities in the nation and in California in terms of people at middle class or better. In South Gate, CA, the person above the poverty rate is below 25%, as well as the number of people who are considered middle class or better.
There is no better example a city being pinched by the tax increase than Oakland, CA, where people above the poverty line is in the lower 25% compared to both state and national cities, and the city’s sales tax is the third highest in the state, but possibly not for long. According to SFGate.com, there is a proposal to raise Oakland’s sales tax to between 10-10.25 percent, equaling the state’s highest sales tax.
Our “No new taxes” Governor has now presided over a record breaking tax hike in order to avoid defaulting on the state budget, which would have been catastrophic for our great state. Running out of time and faced with making either a catastrophic or damaging decision, the legislature chose the damaging one.
Make no mistake, the tax increase is severely damaging. Thousands of Californians are facing foreclosure each week. One in ten Californians is unemployed. While the federal government is cutting taxes and dishing money out to states, California is offsetting the help by making it difficult for people to make daily purchases.
The best to deal with an economic crisis is not taxing the people you depend on to revive the economy. The Foghorn does not support the increase in sales tax. All of the tax hikes in the two-year plan fall on the shoulders of California workers. When they passed the budget, Gov. Schwarzenegger and the California legislature said everyone had to give a little to solve the state’s financial problems, but apparently that doesn’t apply to big California businesses. The state budget has a plethora of corporate tax breaks and credits that would save businesses hundreds of mullions of dollars but would cost the California Treasury at least $2.5 billion over a five-year period.
The plan runs counter to the Obama Administration’s plan to give tax cuts to low and middle income Americans. California law-makers are asking voters to approve five budget-related measures during a special election in May, including one that would implement a state spending cap in exchange for extending tax increase for one or two years. The Foghorn does not support any of the five proposed measures in May, nor do we support any proposal in tax increase until the tax burden is more evenly distributed among workers and businesses.