The sales tax in several East Bay cities is going up to 10 percent Wednesday as local governments increasingly turn to consumers as a preferred revenue generator despite concerns from both tax opponents and advocates for the poor.
While Hayward, San Leandro, Union City, Albany and El Cerrito are the first Bay Area cities to reach the 10 percent threshold, they may soon have company as the state Legislature considers changing the law to give cities and counties more latitude to ask voters for sales tax increases.
“A 10 percent sales tax is bad news for consumers, and it could get even worse,” said David Kline of the California Taxpayers Association.
When it comes to tax fairness, California gets high marks for its income tax, which targets the wealthy, but a demerit for its sales tax, which ranks among the highest in the nation, according to the Institute of Taxation and Economic Policy, based in Washington, D.C.
“Any tax that is based on what you consume is going to take a bigger chunk out of the pockets of low-income families,” said Matthew Gardner, the institute’s executive director.
Gardner attributes rising sales tax rates in California tax to Proposition 13.
Not ony did the 1978 voter-approved initiative limit property tax increases, forcing the state to seek alternative revenue, but it set a daunting two-thirds requirement for property tax hikes.
Since sales taxes can be approved with just a simple majority, Gardner said, local governments have an incentive to seek them, even though they disproportionately affect the poor.
“In California, policymakers can’t weigh these things equally,” he said. “There is an institutional bias leading them to seek sales tax increases.”
El Cerrito and Alameda County are in the vanguard because they received special legislative permission to seek voter approval to bost local sales tax rates 2.5 points above the 7.5 percent set by the state. Several Southern California jurisdictions received similar approval and already have hit the 10 percent mark.
Without special permission, state law currently limits local governments from adding more than 2 percent to the state sales tax. But a bill in the legislature would increase the cap statewide to 3 percent, thereby allowing every city in the state to ask voters to increase the sales tax above 10 percent.
Such measures are already on the rise. The number of proposed sales tax increases on the November ballot jumped from 25 in 2012 to 65 last year.
The taxes have been overwhelmingly approved in the Bay Area. Last year, voters in Hayward, Concord, Richmond, San Leandro, Union City, El Cerrito, San Pablo and Pinole all approved sales tax hikes or extensions. Alameda County voters approved two sales tax increases: one to support its health program and one for infrastructure improvements. The only Bay Area city to reject a sales tax hike was Half Moon Bay.
Political consultant Catherine Lew, whose firm The Lew Edwards Group has passed 62 sales tax hikes, said cities are choosing them to fill coffers because, unlike parcel taxes, which are usually geared to a specific need, sales taxes can be spent on a variety of services, which appeals to voters.
“It’s not just because the threshold is different,” she said. “When we conduct public opinion, we see that constituents want well-rounded services.”
Hayward, which expects to generate $10 million a year from its voter-approved tax, had initially considered asking voters for a facilities bond before polling showed that a sales tax had more support, city spokesman Frank Holland said.
Contact Matthew Artz at 510-208-6435.
Sales tax hikes effective Wednesday
Richmond — 9 percent to 9.5 percent
Pinole — 9 percent to 9.5 percent
El Cerrito — 9.5 percent to 10 percent
Alameda County — 9 percent to 9.5 percent
Hayward — 9.5 percent to 10 percent*
San Leandro — 9.25 percent to 10 percent*
Union City — 9.5 percent to 10 percent*
Albany — 9.5 to 10 percent*
*Sales tax rate increased to 10 percent in part through county tax hike in November
Source: Board of Equalization
