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California struggles with lower sales tax revenues, but new changes unlikely

by Lucinda Rowlands August 29, 2013

sales tax revenues

sales tax revenues

Despite charging the highest sales tax rate in the country, California is struggling to bring in sales tax revenues. In 1979, sales taxes made up roughly 36 percent of the state’s revenue. Today, they only make up 22 percent.

The issue is that while Californians pay a 7.5 percent sales tax rate, many large categories like healthcare, education, and rent are exempt from taxes. Consumers are spending more of their incomes on these tax-exempt items and less on taxable retail goods which is why sales tax revenues are falling.

While some are calling for the government to remove some of the sales tax exemptions, an aide to the governor says this is unlikely. California just increased its sales tax rate from 7.25 percent to 7.5 percent in 2013. The governor doesn’t want to take any further action and ask residents pay more in sales taxes.

Read more at The Wall Street Journal

David Rodeck
Lucinda Rowlands
Lucinda Rowlands

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