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    News / In Depth / Perspective

    Deficit Deal Will Make L.A. County Sales Tax Nearly 10% In July But Doesn't Expand It To Services (including "Pet Tax")...Yet, But...

    (Feb. 24, 2009) -- Starting April 1, LB residents and consumers in most of L.A. County will begin paying 9.25% in sales tax (instead of 8.25% now)...which will become 9.75% starting in July (instead of 8.75% which L.A. County voters were told when they raised it in Nov. 2008 for transportation projects). The net result means L.A. County consumers will pay one of the highest sales tax rates in the nation, approaching well-governed Chicago (10.25%).

    The anti-stimulative, regressive 1% sales tax increase, which will be felt most by low income and working class consumers, is the result of a deal supported by every Sacramento legislative Democrat, plus six legislative Republicans plus CA Governor Arnold Schwarzenegger as part of a combination of tax increases and spending cuts to span a state government deficit (spending exceeding revenue).

    But if a suggestion floated in May 2008 by area Assembly Dems, and proposed earlier this year by CA Governor Arnold Schwarzenegger, had been enacted CA's sales tax would have been expanded to apply to areas not taxed now -- to "services."

    As reported last year, the concept of expanding the sales tax to some "services" was publicly supported at a May 2008 Assembly-staged community forum at ELB's Marshall Middle School, featuring Assemblymembers Warren Furutani, Hector De La Torre, Jose Solorio and (now former) Assemblymember Betty Karnette.

    Assembly Dems in ELB May 10/08
    Assemblyman Furutani at May 2008 Assembly "Forum" @ ELB's Marshall Middle School

    The state lawmakers didn't specify exactly what "services" they'd support taxing, saying the issue should be among the ideas "studied" by an "expert" commission that would examine CA's tax system overall and present a report on how the state's tax system might be changed in 2009. The local lawmakers' position mirrored that of Assembly Speaker Karen Bass (D., Los Angeles) who had previously called for creating an "expert" panel on possible revisions to CA taxes.

    A little over half a year later, with the economy sinking and the deficit worsening, Gov. Schwarzenegger advanced a specific proposal to expand sales taxes to some services. In his proposed FY 09-10 budget, he suggested expanding the sales tax to apply to appliance and furniture repair, vehicle repair, amusement parks, sporting events, golf...and veterinary services.

    The idea hit like cold water on a hot pan. The CA Veterinary Medical Ass'n and animal advocates blasted the idea, calling it a "pet tax" and generating a tsunami of emails and telephone calls. Other interest groups affected by expanding the sales tax to their areas also sandpapered the proposal.

    The Governor and Dems ultimately ducked...and didn't include expansion of the sales tax in their recently-enacted deficit-plugging deal.

    Meanwhile, with less publicity, the appointed commission on CA's tax system -- the one that local Dems said in May 2008 should study possible expansion of the sales tax -- is busily at work. It's anybody's guess whether this non-elected body will recommend expanding the sales tax to "services" and if so to what services.

    The 14-member "Commission on the 21st Century Economy" (created by an October 30, 2008 Executive order signed by Governor Schwarzenegger with Assembly Speaker Bass at his side, photo below) will [Governor's release text] "re-examine and modernize California's out-of-date revenue laws that contribute to our feast-or-famine state budget cycles" and "suggest changes that will result in a revenue stream that is more stable and reflective of our economy."

    Gov. creates Comm'n on 21st Century Economy, Oct. 20, 2008
    Image source: Governor's office

    The group's 14 members were chosen by the Governor (seven appointees) plus the Senate President Pro Tem and Assembly Speaker (three appointees each) plus an additional legislative appointee. The group is scheduled to issue a report to the Governor and the legislature by April 15, 2009.

    If the Commission recommends expanding the sales tax to services, this could give the Governor and Dem lawmakers (all of whom are already on record as supporting expansion of the sales tax to some type of services) political cover to move this idea forward to possible enactment by the state legislature.

    So...although the "pet tax" and expansion of CA's sales tax to other areas were knocked down in the recent deficit-plugging deal, sales tax expansion proposals could very well surface later this year or in the future.

    The ultimate decision is the hands of state lawmakers...the ones who ask for our votes every two to four years.

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