Governor Proposes Higher Sales Taxes

I was disappointed, though not terribly surprised, to read today that the governor has proposed raising sales taxes by a penny to deal with the state's budget deficit. He's characterized the increase as temporary, but anyone who has paid any attention to politics in the past couple decades knows that's a complete joke.

California already has one of the highest sales tax rates in the country, and Alameda County is one of the worst in the state. With this increase, we'd be looking at a nearly 10 percent sales tax rate. It's seriously hard to imagine how we can possibly attract new businesses and non-welfare-recipient residents in such a situation.

I'm really not sure how this budget deficit will play out. It's obvious to me, and most right-thinkers, that the simple solution is to change the state's practices as regards civil servants and indigent medical care. In other words, we need to follow Nevada's lead and actually cut the budget.

But that won't happen -- not on any meaningful scale anyway.

The thing I think will be interesting is to see how the state handles this situation. My guess is we'll follow the lead of places like Canada, where they simply continually pile on new taxes without any regard for driving off residents and jobs.

At the same time, I'd assume California will attempt to turn its balance of payments with the federal government from negative to positive, consuming more spending per dollar of federal taxes paid.

But all these things won't work if we keep increasing spending on core budget items such as salaries (plus benefits) and health care at rates dramatically higher than inflation plus population growth. The miracle of compound interest is working against us, and I see no near-term solution.

So, I guess we should all get ready to enjoy the highest sales tax rates in the country.