Sales Tax Hike Takes Effect Wednesday

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(Sacramento, CA)
Tuesday, March 31, 2009

The statewide one percent increase is a result of the deal lawmakers and the Governor made to eliminate a multi-billion dollar deficit.  It’s expected to bring in close to six billion dollars over the next 15 months or so.  Senate Republican Leader Dennis Hollingsworth did not vote for the increase.  He says it’s going to hurt the state’s economy:

Well, we’re going to see a tremendous drop-off in retail sales and that’s going to cost jobs.”

Sales tax rates in California will now range from eight-and-a-quarter percent to ten and a quarter percent. That’s because many cities and counties have their own local taxes.  Bill Dombrowski is President and CEO of the California Retailers Association.  He calls the tax hike a necessary evil – but isn’t too worried about it hurting shop owners:

“The reality is that there’s very little discretionary spending going on right now, so I don’t think this one cent is going to have a big effect on sales one way or the other.”

Dombrowski does say some people probably hurried to make major purchases like cars and electronics prior to the increase…but says they were likely planning to buy those items anyway. The sales tax increase will stay in effect until July of 2011 – or July of 2012, depending on whether voters approve proposition 1A on the May ballot. 

There were other tax hikes included in the budget deal.  The state income tax has already gone up – and the vehicle license fee will increase next month.