Saving us pennys and costing the State billions:
Beginning Friday, the basic sales and use tax rate statewide drops to 7.25 percent from 8.25 percent as a temporary increase, passed in April 2009 as part of a state budget agreement, expires.
This 1% change will very likely not affect our budgets and I am doubtful we will even feel any difference. Which is why I am surprised that this tax increase was allowed to expire:
Gov. Jerry Brown tried but failed to convince legislators to maintain the higher 8.25 percent rate to help close a budget gap that stood at $26 billion early this year before severe cuts were made. The Board of Equalization estimated the 1 percent increase generated $11 billion for the state since April 2009.
The general fund for California is $84.6 billion. That one percent increase in sales tax amounts to over 7.5% of the general fund. Keeping in mind that the 1% sales tax will doubtfully save us much money (especially since groceries are not taxed), will California experienced more difficulties in maintaining a budget? Also, nearly half of our general fund goes towards education.
Thanks VCStar for the article.