Attention Businesses and Consumers

It begins April 1. The sales tax increases by 1 percent. It is the first of the $12.5 billion in tax increases contained in the budget signed into law February 20 to take effect.

With the tax hike, the average sales tax rate in California’s 58 counties is just short of 9 percent. Connecticut, for example, has a 6 percent sales tax. New York City, 8.375 percent.

The temporary tax lasts until July 1, 2012 – if Proposition 1A on the May 19 special election ballot passes. If voters reject the proposed spending limit, the tax ends a year earlier.

Between now and June 30, 2010 the increase will take $5.8 billion out of the pockets of Californians and deliver it to state government. Unlike, state income tax, sales tax is not deductible on federal taxes.

While all lawmakers – and probably the governor – will stipulate that the sales tax is the most regressive source of state revenue if business interests have to endure a tax increase it’s always better in their eyes if consumers pay it.

The sales tax is regressive because a family of four earning $40,000 per annum pays the same as more affluent Californians such as GOP gubernatorial wanna-bes Meg Whitman and Steve Poizner, for example. That family of four would pay significantly less in income taxes than the two former Silicon Valley executives.

Sales tax rates differ county-by-county. The Board of Equalization already shows what the new rates are on its website.

For example, Oakland, in Alameda County, will have a 9.75 percent sales tax rate. San Francisco, 9.5 percent. Car and major appliance purchases would be cheaper in, say, Quincy in Plumas County where the rate is 8.25 percent — the lowest in the state after the tax increase. The city of Los Angeles has a 9.25 percent rate.

Will Sonoma’s 9 percent rate lead more wine buyers to Napa or Lake counties at 8.75 percent?

Tracy, in San Joaquin County, has an 8.75 percent rate. A recent meeting of the Tracy City Council, included consideration of a plan to use $500,000 to give $500 gift cards to persons who buy cars in Tracy. Taxes on auto sales represent 20 percent of the city’s revenue stream, the Tracy Press reported March 24.

The city has yet to vault the legal hurdle of it being illegal to give away public funds.

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