CITYWIDE — Business owners and shoppers across the city are gritting their teeth in anticipation of the sales tax increase going into effect today, raising Santa Monica’s rate to 9.75 percent.
“It’s counterproductive to what the state wants to do,” said Pat Barrett, president of Barrett’s Appliances on Lincoln Boulevard.
Barrett feels that instead of raising revenue, the tax will only discourage people from buying.
“Not only does the government need taxes to operate — we are well-attuned to the fact that sales taxes are a fact of life,” Barrett said. “But when you are in a depressed economy, to effectively raise the price that people have to pay will only decrease sales.”
The half-cent increase was narrowly approved by voters last November in the form of Proposition R, a transit tax expected to generate an estimated $40 billion over the next 30 years, helping to fund traffic light synchronization projects, repair potholes, expand light rail lines, and purchase clean-fuel buses, all to improve traffic flow.
The measure passed with 67.22 percent of the vote. It required a super majority of 66.67 percent to pass.
The increase comes just two months after the state sales tax was raised by 1 percent, pushing L.A. County’s rate to 9.25 percent. That increase is supposed to be temporary, scheduled to expire on July 1, 2011.
Though very high, Santa Monica’s tax rate is actually far from the top of the list. Avalon on Catalina Island now has a tax rate of 10.25 percent, and the board listed the highest tax rate at 10.75 percent for the cities of Pico Rivera and Southgate.
“8.25 is the base rate in California, so there are some cities that have 8.25 percent,” said Anita Gore from the state Board of Equalization, naming Bakersfield and Atascadero in San Luis Obispo County as examples. “All of [Los Angeles County] will have the 9.75 rate, and then within L.A. county there are cities that have add-on special district taxes [such as Proposition R].”
David Carr, principal investment analyst for City Hall, listed the tax breakdown as follows: 6 percent will go to the California general fund; 1.5 percent will go to L.A. County for traffic and transportation purposes voted in through Propositions A, C and R; 1 percent will go to local jurisdictions such as Santa Monica; .5 percent goes to public safety funds allocated to local jurisdictions including Santa Monica; .5 percent goes to local funds to support health and social service programs (no effect on Santa Monica) and .25 percent goes to the state for the 2004 economic recovery bonds.
“The funds will be used for traffic relief and transportation upgrades throughout the county over the next 30 years,” Carr said. “While this is a county-wide tax, a portion of the funds will be allocated back to all jurisdictions in the county including Santa Monica.”
The state of California, like much of the United States, is in great need of revenue. Some doubt, however, the sales tax’s effectiveness in increasing income.
Barrett noted that the last time the sales tax went up, he had the same number of buyers, but that altogether they bought one third fewer products. He knows buyers look mostly at the bottom line — not just the item’s listed price, but its cost including taxes and any other added on prices.
“We’re doing okay, we’re maintaining more than our market share based on market figures,” he said. “I think they could do an awful lot to spur the economy … lower the sales tax for a month, for July or August for example — here’s the month where you can go out and buy. Have a sale on sales taxes!”
Sunset Park resident Debbie Rothschild, a licensed clinical social worker, considers the increase too small to change her ordinary shopping habits but said bigger buys will be harder to manage.
“It will only affect expensive items, but other than that, it will make no difference,” she said.
Santa Monica artist Karla Klarin feels more strongly about the tax increase.
“There’s something about it being pretty much 10 percent which is very off-putting,” she said. “It’s easy to figure how much tax it will be and that’s not an incentive to go out and buy. It also makes me lean toward places like Amazon [online], where there’s no sales tax and I’ll wait the extra few days to get my books. Politicians think they can do whatever they want and we’ll follow like sheep — but we’re not sheep.”