California voters face a busy election year, with decisions looming on a new governor, state legislators, and a series of ballot measures. Simultaneously, local officials in Los Angeles County and the San Francisco Bay Area are seeking voter approval for increased sales tax rates, already among the highest in the nation.
Tax Increases on the Ballot
Los Angeles County officials are asking voters in the June primary to add a half percentage point to sales tax rates, which already exceed 10% in many cities. This increase is intended to offset a projected $2.4 billion reduction in federal healthcare funding over the next three years, according to Los Angeles County Supervisor Holly Mitchell.
In the Bay Area, voters in four counties will consider a half percentage point increase in November, while San Francisco voters will be asked to approve a full percentage point increase. These proposed taxes aim to address operating deficits within the Bay Area Rapid Transit (BART) system and local bus and trolley services.
Erosion of Tax Limitations
These proposed tax hikes continue a trend of circumventing a state law that limits local add-on taxes to 2 percentage points above the statewide rate of 7.25%. Local officials routinely seek waivers from the Legislature to exceed this cap, and those waivers are typically granted.
Currently, California’s average sales tax rate, including local overrides, is 8.99%, making it the seventh highest in the country. Some cities in Los Angeles County already have rates as high as 11.25%.
Controversy and Concerns
The proposed tax increases are not without opposition. The California Contract Cities Association, representing 73 cities in Los Angeles County, has voiced concerns that a county-wide half percentage point increase could hinder cities’ ability to pursue their own tax measures. According to the association’s executive officer, Marcel Rodarte, cities have expressed that the county tax increase “makes it more difficult for cities” to raise their own rates.
The Bay Area transit tax measure likewise reignites debate over the financial practices of BART and other transit systems, with critics questioning whether they are adequately adjusting to decreased ridership following the COVID-19 pandemic.
Governor Gavin Newsom and the Legislature have provided the Bay Area transit systems with a $590 million loan, contingent upon voter approval of the tax increase, which is estimated to generate $980 million annually.
Some critics, like Bay Area News Group columnist Daniel Borenstein, suggest transit officials are using scare tactics by warning of service cuts if the tax measure fails, particularly given BART’s current low ridership levels despite maintaining a high level of service.
Frequently Asked Questions
What is being asked of voters in Los Angeles County?
Voters in Los Angeles County will decide in the June primary election whether to add a half percentage point to the sales tax rate to offset reductions in federal healthcare spending.
What is the current average sales tax rate in California?
The average sales tax rate in California is 8.99%, according to the Tax Foundation.
What is the state’s role in local tax increases?
Local officials routinely question the Legislature to grant waivers to exceed a state law limiting local add-on taxes, and these waivers are typically approved.
As California voters consider these significant tax proposals, the outcomes could reshape the financial landscape of the state’s largest urban centers and influence the future of public services.