Jon Coupal: Local sales tax hikes coming soon across California

As this column has noted on numerous occasions, California’s state sales tax rate of 7.25% is the highest in the nation. When the local sales tax rates are included, the average sales tax rate, according to a just released study by the Tax Foundation, is 8.99%. But in several cities, the total sales tax rate is now above 10%. The cities of Lancaster and Palmdale win the award for the heaviest sales tax burden at 11.25%.

With all the talk in California about “sticking it” to the wealthy, the reality is that  sales taxes are considered regressive because low- and middle-income taxpayers spend a higher proportion of their income on taxable goods. 

Under Proposition 13, sales tax increases at the local level require voter approval. Taxes for a special purpose require a two-thirds vote while taxes for “general” purposes can be approved with a majority vote. Last year saw a multitude of higher sales taxes that were approved at the November 2024 ballot, and which took effect on April 1st last year. Of the 115 sales tax increase measures, 90 passed and 25 failed. 

Given California’s across-the-board high tax rates, it may seem surprising that so many sales tax proposals passed. There may be a few reasons for this. First, while statewide tax hikes rarely pass, voters may have more trust in their local governments. But the high rate of passage is also due to how the ballot process is manipulated. Local governments bend over backwards to keep tax hike proposals obscured until the last moment hoping that opposition won’t have time to coalesce. General tax increase proposals will often highlight “essential government services” like police and fire protection. But the fine print reveals that the revenue can be used “for any lawful purpose” including administrative costs, pensions, and travel. 

Even with the high passage rate of local sales tax increases in 2024, it is about to get a lot worse. That’s because local governments are increasingly using a court-created loophole to avoid the two-thirds voter threshold. That loophole was created out of whole cloth by the California Supreme Court’s 2017 decision in California Cannabis Coalition v. City of Upland. It created an ambiguity as to whether the two-thirds vote threshold for local special taxes would apply to local initiative measures put on the ballot by special interests. Since Upland, all kinds of unconstitutional taxes, including sales taxes, have been imposed on Californians costing billions of dollars that they would not have had to pay if the courts followed the plain language of Prop. 13.

One proposed Upland sales tax hike planned for this coming November is a 5-county-wide tax for transit services. The proponents have already raised nearly $3 million to lay the groundwork for the campaign. Because a transit tax is clearly for a specific purpose, the tax would require a two-thirds vote under Prop. 13. But under the Upland loophole, the proponents believe that the tax can be approved by the voters of the five counties with a simple majority vote. (It should be noted that, given the involvement of the Legislature in creating the special taxing district that this would be the furthest thing from a “citizens” initiative). 

The good news here is that a proposed initiative currently in circulation would close the Upland loophole for special sales taxes. The Local Taxpayer Protection Act to Save Prop. 13 would restore the 2/3 vote, even if proposed by an initiative backed by special interests. More information about this important taxpayer protection can be found at www.SaveProp13.com. 

Jon Coupal is president of the Howard Jarvis Taxpayers Association.