The highest sales-tax rate in the nation belongs to California. That rate is officially 7.25 percent. However, local jurisdictions can add to that base rate. For example, in most of Contra Costa County (east of San Francisco), the sales-tax rate is 8.25 percent. In Concord (also in Contra Costa County), the rate is 8.75 percent.
Some Californians are calling for closing “the Internet sales tax loophole” by forcing Internet sellers to collect the same sale-tax rate as a California retail store.
While the sales-tax disparity between Internet transactions and those of physical stores seems unfair, the real problem is the huge growth in the sales tax over the last few decades. In 1966, the sales tax was three percent. Today, the sales tax is three times as much. Yet, in the 1960′s, the state could afford low-tuition higher education, freeway construction, and a massive state water project. For example, in 1966, the tuition at a University of California campus was about $180 per year.
California Governor Jerry Brown is sponsoring a November 2012 ballot measure that will increase — statewide — the California sales-tax rate by one-quarter percentage point. (Brown’s plan will also raise California’s personal income-tax rates on individuals and families of moderate and high income.)
If there is to be a sales tax — Internet or otherwise — Californians should work to push the sale-tax rate back to three percent. The prosperous 1960′s was associated with lower, not higher, sales taxes.
The more things cost, the less people buy. Lowering taxes means that consumers will have more money. When consumers spend more, businesses will increase hiring and invest more funds in new plant and equipment.
(Richard Colman is the Founder and President of Biomed, Inc. Originally posted on Fox & Hounds.)