Proposals for two quarter-cent sales-tax hikes are circulating in Sacramento and could show up on the March ballot.
The moves come as interest groups try to find new revenue for state programs in the face of the economic downturn.
Both measures would seek to capitalize on the concern about public health and safety sparked by the Sept. 11 attacks and ongoing bioterrorism threats.
One measure, sponsored by a coalition of labor and community health groups, seeks more funding for emergency medical response teams and public health facilities that are grappling with increased testing and preparedness costs.
The other measure, put forward by a coalition of Southern California law enforcement and firefighter associations, would cover some of the added costs being incurred to step up patrols of airports, high-rise buildings and other potential terrorism targets.
Neither measure is fully drafted. Backers say they still are negotiating with the Davis administration and legislative leaders about what form the proposals ultimately will take. Both are closely related, so it’s possible they might be folded into a single, half-cent sales-tax hike. Some believe a combined measure may be easier to pass.
With the deadline passed to qualify initiatives for the March primary ballot by petition, the proposed sales-tax increases could get on that ballot only by an act of the Legislature. Otherwise, backers would have to wait for the general election in November.
State sales taxes are paid by merchants. The funds are collected by the state and then distributed back to the cities and counties where the sales took place, unless the funds are earmarked for a specific purpose, as these would be. Each quarter-cent hike in the sales tax generates about $1 billion in revenue.
Backers say the need for these measures is great, especially since other sources of state funding have dried up in the budget crisis.
“People may not want to pay more in taxes, but they also don’t want to end up dead, which could very well be the result if we don’t get more funding into the system,” said Beth Capell, lobbyist for a coalition of labor and community health groups called Health Access. Back in the 1990s, this same coalition campaigned for a universal-healthcare initiative.
“California’s public health system can barely handle a flu epidemic, much less the deaths and bioterrorism threats since Sept. 11,” Capell said.
Public-safety advocates are making a similarly dramatic case for their proposal.
“We’re dealing here with the first responders, the first line of defense in the war we’re now fighting,” said Timothy Yaryan, the Sacramento lobbyist for the Association of Los Angeles Deputy Sheriffs and the L.A. Police Protective League who has authored the public safety measure.
Yaryan said he was not holding out much hope for increased federal funding for local law enforcement agencies.
“The Bush administration has already essentially told us we’re on our own,” he said.
Even tax opponents concede that these groups have powerful arguments in the wake of the Sept. 11 attacks. But they argue that increasing the sales tax in the midst of a recession will hurt the economy. If more funds are needed for public health and safety, they should come from existing sources.
“The smoke hasn’t even cleared from the debris of the World Trade Center and the usual suspects are back asking for more revenues,” said Jon Coupal, president of the Howard Jarvis Taxpayers Association. “The focus instead should be on reining in the incredible growth in state government,37% growth in the last three years alone,and then you wouldn’t need a tax increase to meet these new demands.”
Coupal said the state sales tax base rate of 7% already is slated to go up a quarter-percent on Jan. 1. (Orange County’s sales tax rate is 7.5%.)
In 1991, then-Gov. Pete Wilson signed into law a quarter-cent cut in the sales tax designed to go into effect after two years in which budget reserves topped 4%. That trigger was reached for the first time this past Jan. 1, and the sales tax went down a quarter-percent.
But now budget reserves have disappeared and the state is confronting a deficit that could go as high as $14 billion. So the cut in the sales tax will come off Jan. 1, pushing the base state rate back up to 7.25%.
“With these new measures, you’re talking about a cumulative three-quarters of a percent hike in the sales tax, which is bound to have an impact on consumer spending,” Coupal said.
But backers say that carefully crafted sales tax measures can get voter approval, even in a recession. They point to 1993, when voters passed a half-cent sales tax for public safety agencies by a margin of 60% to 40%. That, however, was a continuation of a half-cent sales tax increase that was set to expire, not a new levy. n
Fine is a staff writer with the Los Angeles Business Journal.
