What a perfect time for an initiative to cut the California sales tax by a half-cent. In announcing his new budget proposal for fiscal 2022-23, Gov. Gavin Newsom boasted the state enjoyed a $45.7 billion surplus.
Inflation also is raging. On Wednesday, the federal Bureau of Labor Statistics announced prices rose 7 percent from a year ago, the highest rate in 40 years. We all feel it in the grocery aisles, in the lumber yards and at the gas pump.
If the statewide 7.25 percent tax were cut by a half-cent, it would drop to 6.75 percent. That would be a reduction of just 6.9 percent.
According to the governor’s proposal, he anticipates collecting $32.2 billion in sales and use tax. Reducing that by 6.75 percent would bring a cut of just $2.2 billion. That easily could be absorbed by the $45.7 billion surplus.
But it gets better because of the “supply side effect.” That’s where a tax cut makes it more attractive to do business or just to live. California’s reputation as a high-tax state discourages people from doing business here, or living here. Our population even has been dropping in recent years, with people and businesses fleeing to states with more welcoming tax climates.
Even a small tax cut of a half-cent would send a signal that the Golden State was becoming more welcoming to the gold of citizens and companies. It wouldn’t punish them as much just for the privilege of living in great weather.
Hence, if more businesses and citizens stayed here—or even came here from other places—more money would be spent. And more spending means more sales taxes collected on the higher spending. The higher sales taxes collected could off some of that “lost” by the rate cut.
Newsom, to his credit, seems to understand this, at least a little bit. His new budget includes a suspension of the inflation-caused 5.6 percent increase in the gas tax, saving motorists $520 million.
How to do it? It’s unlikely the Legislature would pass such a half-cent tax cut. An initiative would be needed—and would sell itself. If signatures were collected beginning now, it could be put on the November ballot.
“Just a half-cent to fight inflation” might be a good slogan. Or, “Half-cent back to your family.”
The song “Seven-and-a-Half-Cents” from the old musical “The Pajama Game” might be modified: “A half-cent doesn’t buy a lot. A half cent doesn’t mean a thing. But give it to me every buy, every day of every week, and that’s enough for me to be living like a king!”
I’m just a journalist, not a political activist. So those who know how to gin up a campaign can take this idea and run with it.
But there won’t be a better time to cut California’s punishing tax rates. Cutting income taxes always brings the charge of “helping the rich.” But the sales tax punishes the poor the most because everybody needs the necessities of life. A rich person doesn’t even feel the sales tax on a $400,000 Bentley. A poor person feels that 7.5 percent (or higher) tax on a $5,000 used Kia Soul, clocking at $375.
That means another slogan might be, “A half-cent for the poor.”
Finally, once the half-cent tax cut passes, voters will be starting a habit of tax cuts. Then how about another half-cent tax cut? It doesn’t mean a thing.
