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BOE Member George Runner

A Temporary Tax That Never Went Away

California taxpayers are celebrating a rare victory. Despite Democrat efforts to extend them, the sweeping “temporary” tax increases of 2009 have gone away. This is an uncommon treat, as many prior tax hikes sold as “temporary” are still with us today.

As Californians enjoy the benefits of this victory, today marks the 20th anniversary of a prior sales tax increase that is still with us. On July 15, 1991 Californians were impaled with a “temporary” sales tax increase of 1.25%. This measure was enacted by the Legislature to address the state budget shortfall during the early 1990s economic downturn.

Fast forward to June of this year. A 2009 sales tax rate increase of 1% was set to expire on July 1, 2011. Despite a vote of the people against extending this and other temporary tax increases, Governor Jerry Brown and Democrat legislators unsuccessfully sought a five year extension of these taxes.

These higher taxes amounted to billions of dollars per year out of the pockets of struggling Californians and into the hands of wasteful government. Combine the 2009 temporary sales tax increase with the 1991 temporary sales tax increase, and we’re talking about $11 billion dollars per year taken from the people. And that’s not even counting the other tax hikes.

For most of our state’s existence California prospered with either no sales tax, or much lower rates than we have today. Today five states—Alaska, Montana, Oregon, Delaware and New Hampshire—still have no sales tax at all. Of these states, two—Alaska and Montana—are among only four states which have no budget deficit.

California opened its doors to the sales tax in 1933 with the Riley-Stuart Act, as did several other states. It was sold as an “emergency measure” during the Great Depression, at a rate of just 2%. As late as 1977 the sales tax rate in California was still only 4.75%. Despite our recent tax reduction, our 7.25% statewide rate remains the highest in the nation, not including over 130 different local governments imposing their own sales tax—raising the tax rate to nearly 10% in some areas.

The answer to California’s problems isn’t higher taxes. Californians already bear the sixth highest tax burden in the nation. Rather we must reduce taxes and limit regulations to create an environment where job creators can expand and thrive.

As today’s somber tax anniversary passes with little notice, let it be a reminder that the government’s appetite for your money is insatiable, and “temporary” taxes rarely go away.

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