Sales tax: 10.75%?
County supervisors are expected to reverse themselves Tuesday and approve an MTA request to put its half-cent sales tax (pdf) on the Nov. 4 ballot. Already on that ballot are proposals to put separate sales tax increases to voters (pdf) in El Monte (a half cent on the dollar), Maywood (1 cent) and Pico Rivera (1 cent). South Gate voters already increased their sales taxes by a penny in the June election. So shoppers in El Monte could end up with sales taxes of 10.25%. Shoppers in South Gate, Pico Rivera and Maywood could pay 10.75%. No, those are not typos.
Stay with me for a moment.
The South Gate 1-cent sales tax increase takes effect Oct. 1. Tax revenues had dropped off steeply in that southeast Los Angeles County city since the demise of the Pete Ellis auto dealerships in the early 1990s. If you lived in Southern California in the previous decade, you're very likely, right now, unable to stop yourself from hearing the TV jingle in your head. "Pete Ellis Dodge, Long Beach Freeway, Firestone exit, South Gate." Those dealerships kept that town in business, so its understandable that city government would look for more revenue. But they must have given up on attracting another dealership, given that buyers would have to pay an extra $150 in sales taxes on a $15,000 car they buy in South Gate instead of most other parts of the county.
When asked, many state officials will tell you that state sales taxes are 6.25%. That's only technically accurate; the state imposes another 1% that it distributes to local governments.
So, California currently taxes sales at 7.25 cents on the dollar, divvied up as follows: 4.75 cents for the state general fund, plus a separate quarter-cent for the general fund; a quarter of a cent for a fiscal recovery fund approved during the last financial crisis -- the one that resulted from the dot-com bubble bursting as the car tax was lowered; a half-cent for local governments; another half-cent for local governments that can be spent only on public safety; and one more cent for cities and counties, a quarter of which must be used for transportation.
On top of that, cities, counties and special districts can add up to another 2 cents, but that's it. There's a sales tax cap of 9.25%. Los Angeles County already has gone to 8.25%. So if the MTA tax passes, sales taxes in Los Angeles County will be 8.75% in most cities and in unincorporated areas. Now add the 1 cent that South Gate will get beginning Oct. 1, and you're at 9.75%; same with Maywood and Pico Rivera if voters there approve increases.
But wait, that's above the 2-cent cap. How could that be? The whole point of the legislation pending in Sacramento to put the MTA tax on the ballot is not just authorization of the ballot measure, but authorization for lifting the cap. Otherwise, a portion of taxes you pay on goods you buy in most parts of the county would go to the MTA, but not if you bought in South Gate (nor, perhaps, Maywood and Pico Rivera).
Now, add in the temporary 1 cent sales tax that Gov. Arnold Schwarzenegger reportedly has floated to get the state out of its current budget fix, and you're at 10.75%. More than a dime on the dollar. This is the quandary for places like South Gate, Maywood, Pico Rivera and El Monte. They need more money -- but will in all likelihood get less if shoppers see that they can pay less in sales taxes by going instead to, say, Montebello.
But you could apply the same argument to Los Angeles County and the MTA sales tax, especially if you're in driving distance of the county line.
*AP Photo/Ted S. Warren