Ranking State and Local Sales Taxes by Kail Padgitt (html) (pdf). The data reported for January 1, 2011 shows that California has the highest state tax (but they include the 1% that goes to local jurisdictions) and combining the state and local rates, California has the second highest rate (average 9.01%) just after Tennessee at 9.44%). Colorado has the lowest state rate at 2.9% (quite a difference from California!) and seven states have a 4% rate including New York.
In Santa Clara County, the sales tax rate is 9.25% - that's high. Some might argue that it is high because the state needs money. Yes, the state has lots of expenses, but it also has a very narrow sales tax base with respect to how it applies to personal consumption. California exempts food (other than at restaurants), utilities, digital goods, personal services and live entertainment. That represents a lot of personal consumption. Broadening the base and lowering the rate would make the tax more equitable and simpler (fewer exemptions to define). It could also generate funds to reduce the pyramiding in the sales tax, such as by allowing or phasing-in, an exemption for manufacturing, R&D and other equipment which could help make the state more attractive for businesses.
I've written about this before - and presented testimony on the topic ...
- Testimony before CA Assembly Revenue & Taxation Committee on 1/13/2010 for informational hearing on alternatives to the COTCE recommendations (pdf).
- Papers, op eds and older testimony
What do you think would improve California's sales tax?
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