Walters: Los Angeles and Bay Area voters to decide whether to hike already high sales taxes

This year California voters will choose a new governor, fill other statewide offices, elect 100 state legislators and 52 members of Congress and weigh an array of knotty ballot measures.

Meanwhile, officials in the state’s largest urban centers, Los Angeles County and the San Francisco Bay Area, will test voters’ appetite for raising sales tax rates — already among the nation’s highest — to levels never before seen in California.

Los Angeles officials are asking voters in the June primary election to add another half percentage point to rates that already top 10% in most of the county’s cities, raising money to offset reductions in federal health care spending.

And voters in four Bay Area counties will decide in November whether to add another half percentage point, while those in San Francisco will be asked for a full percentage point — all to close the operating deficits of the Bay Area Rapid Transit system and local bus and trolley services.

They are the latest in a string of increases that have virtually destroyed a state law limiting local add-on taxes to 2 percentage points over the statewide rate of 7.25%. Local officials seeking to go beyond that cap routinely ask the Legislature to grant waivers and they are routinely approved.

California consumers spend about a trillion dollars a year on taxable goods, and the 7.25% statewide rate — the highest of any state — generates more than $70 billion a year, roughly half of which goes into the state’s general fund budget, with the remainder being divvied up among cities, counties and special districts.

When local override taxes are added, California’s sales tax rate averages 8.99%, according to the Tax Foundation, or seventh highest of any state. With local rates, the range is as high as 11.25% in some Los Angeles County cities.

The sales tax hikes being sought this year are not without controversy.

Los Angeles County Supervisor Holly Mitchell, who led the effort for a health care tax increase, said it is needed to offset a loss of $2.4 billion in federal aid over the next three years. But it has drawn opposition from the California Contract Cities Association, whose members get services from county governments under contract.

There are 73 contract cities in Los Angeles County and the association’s executive officer, Marcel Rodarte, told supervisors in a letter that adding a half percentage point to the overall county tax rate could thwart efforts by cities to raise their rates. “Cities said if we wanted to do our own sales tax measure (increase), this makes it more difficult for cities,” Rodarte said.

Meanwhile, the Bay Area transit tax measure renews a long-running dispute over whether BART and other transit systems are too beholden to their unions and have refused to adjust to the decreased ridership that began during the COVID-19 pandemic.

Gov. Gavin Newsom and the Legislature have given the Bay Area systems a $590 million loan to avoid deep reductions in service, but they can’t tap the money unless voters agree to raise taxes by an estimated $980 million a year.

Critics say transit officials are trying to scare voters into supporting the tax increase by describing doomsday effects if they don’t back the measure.

Bay Area News Group columnist Daniel Borenstein, wrote recently, “We can’t keep putting Band-Aids on the region’s transportation financing problems. The plea for the loans to cover ongoing operating expenses stems from a failure to right-size operations to meet post-pandemic demand. That’s especially true of BART, which is threatening voters with shuttered stations if the sales tax measure doesn’t pass in November. Never mind that BART is carrying less than half as many passengers as it was before the pandemic while providing more train service. It’s nuts.”

Dan Walters is a CalMatters columnist.