By Dale Kasler
Published: Tuesday, Jun. 28, 2011 – 12:00 am | Page 1A
Voters tend to fume about the Legislature, but here’s one consequence of the Capitol budget dance that might make some people smile:
A tax cut.
California’s sales tax is about to drop by a penny, to a statewide rate of 7.25 percent. The change takes effect Friday, with the expiration of the tax hikes approved by the Legislature in February 2009.
In addition, the vehicle license fee will drop by nearly half, to 0.65 percent of the car’s value.
Gov. Jerry Brown and Democratic lawmakers wanted to extend the higher taxes beyond Friday, when the state’s new fiscal year begins. But with Brown unable to secure the Republican votes needed for a two-thirds supermajority, the higher tax rates will expire.
Democratic leaders have vowed to pursue a ballot initiative next year to raise the taxes again. But for the time being, at least, the lower taxes will save Californians an estimated $5.87 billion a year, according to Department of Finance spokesman H.D. Palmer.
That’s particularly good news for merchants doing business near the California border, where they have to compete against low-tax states.
“Pretty exciting, huh?” said Stefanie Olivieri, who runs Cabona’s clothing store in Truckee. “I assume there are people who will do more shopping.”
Effective Friday, the sales tax in Truckee will be just slightly higher than it is in Reno.
Although the statewide sales tax in California will revert to 7.25 percent, many jurisdictions charge more. The new rate in Truckee, for instance, will be 7.875 percent. In the city of Sacramento, it will be 7.75 percent.
While it will benefit merchants, economist Chris Thornberg said, the tax cut alone won’t create a huge statewide shopping boom.
Lowering the tax rate will cause retail sales to grow 0.3 percent a year, said Thornberg, who runs Los Angeles consulting firm Beacon Economics. Taxable retail sales totalled $456.49 billion in 2009, the last year for which full-year figures were available. If Thornberg’s right, the lower tax will mean an additional $13 billion in sales.
“It’s something,” he said. “I’m not going to completely diss it, but it’s not the be-all and end-all.”
Steve Snyder, chairman of the California New Car Dealers Association, said the combined impact of the lower sales tax and vehicle license fee could make car purchases more attractive.
The sales tax cut in particular will make a meaningful difference to some customers, said Snyder, head of Gold Rush Chevrolet and Gold Rush Subaru in Auburn.
“One percent’s a big deal. People can relate to 1 percent of anything,” Snyder said.
Jean Hawkins, owner of Valley Oak Home Appliance Center in Elk Grove, said she welcomes the lower tax as well.
“I think it’s going to help business,” Hawkins said. “Is it going to help huge? No. But it’s going to help.
“People are very, very, very tight with their money right now,” she said. “Whatever relief they feel they can get, that reduction in sales tax is a psychological effect.”
At the same time, a one percentage-point drop in sales tax might not be as important to many shoppers as the wide fluctuations in gas prices, said Arden Fair mall general manager Tod Strain.
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