California Voters to Decide on Sales Tax Hikes and Key Elections

California’s Upcoming Elections and Tax Proposals

This election year in California is particularly eventful, as voters are tasked with selecting a new governor, various statewide officials, 100 state legislators, and 52 Congressional representatives. Additionally, they will confront numerous complicated ballot measures.

In the midst of these elections, officials in California’s major metropolitan areas, particularly Los Angeles County and the San Francisco Bay Area, are gauging public willingness to further increase sales tax rates, which are already among the highest nationally.

Los Angeles County officials propose a half-percentage point hike in the June primary, potentially raising rates above 10% in most cities. This increase aims to compensate for reduced federal healthcare funding.

Conversely, in the Bay Area, voters in four counties will decide in November on a proposed half-percentage point increase, while San Francisco will consider an entire percentage point hike. These measures aim to bridge budgetary gaps for the Bay Area Rapid Transit (BART) system and local public transportation services.

These proposals highlight a trend where local tax additions have effectively eroded state-imposed limits, allowing local authorities to request legislative waivers that are frequently granted.

With Californians spending approximately a trillion dollars annually on taxable goods, the state’s 7.25% base rate— the highest of any state—generates over $70 billion each year. This revenue is split between the state’s general fund, cities, counties, and various districts.

Including local surcharges, California’s average sales tax rate stands at 8.99%, ranking seventh highest in the nation according to the Tax Foundation. In some Los Angeles County cities, rates climb to 11.25%.

Controversy Surrounding Proposed Tax Increases

The proposed sales tax increases have sparked debate. Holly Mitchell, a Los Angeles County Supervisor, advocates for the healthcare tax hike to counteract a projected $2.4 billion federal funding shortfall over the next three years. However, the initiative faces opposition from the California Contract Cities Association, representing cities that contract with county governments for services.

Marcel Rodarte, the association’s executive officer, expressed concerns in a letter to county supervisors, stating that the additional half-percentage point could hinder cities’ ability to pass their own tax measures. “Cities said if we wanted to do our own sales tax measure (increase), this makes it more difficult for cities,” Rodarte noted.

In the Bay Area, the transit tax proposal reignites long-standing debates on whether BART and other transit systems are overly influenced by unions and have failed to adjust operations in response to reduced ridership since the COVID-19 pandemic.

Governor Gavin Newsom and the state Legislature have provided a $590 million loan to Bay Area transit systems to prevent drastic service cuts, contingent on voter approval of taxes estimated to raise $980 million annually.

Critics argue that transit authorities are employing scare tactics to secure voter support. Columnist Daniel Borenstein from the Bay Area News Group recently commented, “We can’t keep putting Band-Aids on the region’s transportation financing problems. The plea for the loans to cover ongoing operating expenses stems from a failure to right-size operations to meet post-pandemic demand.

That’s especially true of BART, which is threatening voters with shuttered stations if the sales tax measure doesn’t pass in November. Never mind that BART is carrying less than half as many passengers as it was before the pandemic while providing more train service. It’s nuts.”