Urge Guv Brown to Veto Sales Tax Increase AB 1324

Urge Guv Brown to Veto Sales tax Increase AB 1324

CALIFORNIA TAXPAYERS ASSOCIATION, 8/28/14,

Dear Governor Brown:

The California Taxpayers Association opposes AB 1324, which would authorize the City of El Cerrito, subject to voter approval, to impose a transactions (sales) and use tax for general purposes at an additional rate of up to 0.5 percent, exceeding the 2 percent statutory cap(Revenue and Taxation Code Section 7251.5).

El Cerrito currently levies two district taxes: a 0.5 percent tax for general purposes, and another 0.5 percent tax for street improvements, resulting in a 9.50 percent sales and use tax rate for El Cerrito. Authorizing another 0.5

percent tax under this bill would put the city’s tax rate at 10.0 percent, tying with three other cities for the highest in the state, and adding significantly to the costs of living and doing business.

City officials in El Cerrito claim to be in a unique fiscal crisis, and the author

has stated that local property values have declined, thus resulting in “diminished revenues from reduced property assessments.” In fact, however,

“the increase to the local tax base for 2014-15 is nearly $13.3 billion….

representing a 9.09 percent increase in assessed value….bringing the total local assessment roll to over $159.3 billion….the highest to date in Contra Costa County’s history,” according to County Assessor Gus Kramer. Also, according to Mr. Kramer, El Cerrito’s assessed value totaled $3.3 billion for 2014-15, representing an8.71 percent increase from the prior year.

California has the highest sales and use tax rate in the country, with a statewide rate of 7.5 percent and authorization for local governments

to add additional sales and use taxes, generally capped at a combined rate of 2 percent.

El Cerrito is the first city to request authorization to be exempt from the 2 percent statutory cap. This bill sets a dangerous precedent that certainly would lead to additional sales and use taxes to be imposed by cities, thus rendering the 2 percent cap useless.

Limits on taxes exist for a reason. If local governments continue to become exempt from the limits, the limits become meaningless. Under existing law, if the Legislature determines that the 2 percent cap is too low, then the

Legislature may raise the limit for all local governments in the state. However, unless the Legislature decides to raise the cap statewide, local governments should not be given special permission to exceed the limit.

For the foregoing reasons, we respectfully urge your veto of AB 1324