Voters all through Los Angeles County have been requested repeatedly to approve greater native gross sales taxes. The pitch is acquainted and infrequently compelling: The cash will defend essential companies that residents rely upon, reminiscent of healthcare and hearth companies. And voters have regularly agreed. Earlier this yr, they accepted a 0.5% county-wide gross sales tax enhance and extra hikes in 10 cities, together with Calabasas, Gardena and San Marino. This November, 5 extra cities, together with Los Angeles, are requesting gross sales tax will increase or extensions of beforehand accepted greater charges.
It’s comprehensible that native governments wish to elevate these charges to fund their budgets.
However rising gross sales taxes additionally contribute to the area’s terribly excessive prices. With affordability now the highest concern on Californians’ minds, it’s price asking how a lot residents are already paying and whether or not there are limits to what they are going to settle for.
A new report from the Rose Institute of State and Native Authorities finds that gross sales tax charges have climbed throughout Southern California over the previous decade, with L.A. County far outpacing Orange, Riverside and San Bernardino counties.
In L.A. County, the common gross sales tax charge rose from 9.09% in 2016 to 10.83% at the moment. The bottom charge of any metropolis in L.A. County is now a full proportion level greater than the very best charge in any neighboring county. Two cities in L.A. County, Lancaster and Palmdale, have reached 11.75% — the very best within the state. On Nov. 3, San Gabriel may set a brand new report, as voters determine on a one-point enhance that might elevate town’s charge to 12%.
Gross sales taxes are assessed on retail purchases of products reminiscent of clothes, electronics, furnishings and automobiles. Gross sales of groceries, prescription remedy, housing and lots of companies are usually not taxed. The statewide base charge is 7.25%, with something above that base needing to be a voter-approved “district” tax. When counties and cities ask voters to approve a rise, the jurisdiction that levies it retains all of the income.
In L.A. County, the rise in gross sales taxes has largely been pushed by countywide measures. Over the past 10 years alone, voters accepted three of those measures totaling 1.5 factors: Measure M in 2016 (transportation), Measure A in 2024 (homelessness) and Measure ER in 2026 (healthcare). These measures, mixed with earlier ones courting to 1980, introduced the minimal charge within the county to 10.25%. Some cities have stacked gross sales tax will increase on high of that quantity.
State regulation usually limits the mixed district taxes in anybody jurisdiction to 2%. In idea, this creates a statewide gross sales tax cap of 9.25%, however the Legislature can waive the restrict, and it has completed so repeatedly for the state’s largest county. As a result of these waivers are routinely granted, particularly during the last 10 years, the two% restrict doesn’t actually function as a ceiling.
One motive voters repeatedly approve these measures could also be that they see the aim of a tax, however not the entire worth. As an illustration, the poll query for Measure ER in June introduced the problem as a 0.5% basic gross sales tax for 5 years to “scale back the chance of closing the County’s 4 public hospitals and quite a few clinics.” The measure didn’t clarify to voters that the county’s base gross sales tax charge was 9.75% or that Measure ER would enhance it to 10.25%.
This omission obscures the truth that rising gross sales taxes meaningfully contribute to the excessive value of residing in L.A. County. The results are best to see in giant purchases. For instance, a Palmdale resident who buys a $50,000 automotive would pay a $5,875 gross sales tax pursuant to town’s 11.75% charge. However a resident of one other Southern California metropolis reminiscent of Anaheim, which has a 7.75% gross sales tax (tied for the area’s lowest charge), would pay solely a $3,875 gross sales tax on the identical automotive. Dwelling throughout the county line would yield a $2,000 financial savings within the last buy worth.
Related gaps apply to different taxable purchases. Residents from totally different elements of Southern California pays very totally different gross sales taxes on on a regular basis purchases, relying on the place they stay and store. However as a result of charges typically climb a fraction of a degree at a time, many residents in high-tax cities might not understand how far more they pay than buyers simply throughout a metropolis or county line.
To this point, voters haven’t imposed a ceiling on the rise of gross sales taxes in L.A. County. This November’s election outcomes will take a look at that development. 5 gross sales tax measures will probably be on L.A. County ballots. Notably, this contains Measure FD, Los Angeles’ half-cent enhance to 10.75%. Maybe voters will approve this and different gross sales tax hikes. Or perhaps their urge for food for brand spanking new taxes will wane as affordability and price of residing take precedence over the companies these measures fund.
Kenneth P. Miller is professor of Authorities and director of the Rose Institute of State and Native Authorities at Claremont McKenna School. Keith Maben is a pupil researcher on the Rose Institute.
