L.A. City Proposes Sales Tax Increase

Watching our government operate in crisis management mode is disappointing considering the issues facing our nation. I mean, was it really necessary for us to have to spend our New Years Eve and New Years Day watching the hourly updates and countdown to the fiscal cliff? In the end, couldn’t our government have come up with the agreement they did a month prior?

We shouldn’t be surprised because this was the same mode of operation when congress was discussing raising the debt ceiling a year ago and it will be the same drama when the debt ceiling, budget cuts and sequestration are discussed in a few months. The last congress kicked the can to the next congress, so what’s changed?

What would be encouraging though is if our president and House and Senate leaders spend less time on television blaming each other for the current fiscal problems and get in a room and work the issues like grown men and women. I thought that’s what we were paying them to do.

As I write this column, our national debt is $16,455,674,641,631 and climbing and has surpassed the debt ceiling that was set at $16,394,000,000,000 in 2012. I write the national debt numbers without abbreviation because I think we have lost perspective on how big these numbers really are. The national debt equates to $52,377 per United States citizen to date. If we took the approach of our government to manage our own day-to-day budgets we would be increasing our personal debt by taking out credit cards, pay day loans, borrowing from family and friends to pay for a lifestyle we couldn’t afford or sustain. In the end, without cutting our expenses, we would probably go bankrupt. Our government must make the same tough choices that individuals do each day to in order to balance the growing deficit. This is also true for our local government.

Back here in Los Angeles, our city council is proposing a 0.5% sales tax increase to cover a $200 million dollar city budget shortfall on the March ballot. This proposed increase comes at a time when many are still finding it difficult to make ends meet. Sales tax hits the rich, poor and middle class, so why is the city council proposing a sales tax increase now? Is there another way to reduce the city debt?

Well, for the past few years our city controller and mayoral candidate Wendy Gruel performed audits of many of the city departments. Her audits came with recommendations to save the city millions of dollars that would help offset the cities debt crisis. It would seem appropriate that each of the audit recommendations be implemented and measured for effectiveness before the city council asked for a sales tax increase from an already over taxed public.

When it comes to sales tax increases, they are sold to us as being temporary and represented as a small percent increase only and never represented as a percent increase of the existing sales tax. For example, when Prop 30 was being proposed, we heard more about taxing those who make over $250,000 per year and rarely about the 0.25% sales tax increase that came along with it. Maybe because 0.25% sounds like an insignificant number, correct? The reality is that a 0.25% increase on the state sales tax rate of 7.25% is a 3.45% tax increase on everyone. As we start 2013, our current state tax is now 7.5%. On top of the state sales tax is another 1.5% local tax bringing our current Los Angeles sales tax to 9%. If the proposed sales tax increase is approved on the March ballot, doing the math again, a 0.5% increase on top of the current 9% sales tax is another 5.6% tax increase. This would mean that between Prop 30 and the proposed 0.5% tax increase, if approved, would result in an 8.95% sales tax increase since November. What happened to protecting the poor and middle class from tax increases?

This 1903 quote from Winston Churchill is still true 110 years later, “We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.” spt