California's Sales Tax Increase: Who Protects The Tax Payer?

California’s Sales Tax Increase. Just a penny…
Given California’s inability to balance the budget, the Governator signed a bill that will increase sales tax by just a penny. Arnold Schwarzenegger’s PR team has led us to think that a penny increase on the dollar is infinitely small, but this is certainly not the case. Currently I’m paying 8.25% in San Mateo for sales tax and Schwarzenegger’s bill will increase my tax;(by a penny ) placing the final sales tax will be at 9.25%. The penny increase in sales tax actually ended up increasing sales tax by over 12%! I’m certain if the media called the plan a 12% increase in sales tax there would be riots in the streets.

I’m disappointed that all of the major papers in California talked only about a penny increase in tax per dollar. An penny increase in sales tax is much more feasible to pass than a 12% increase in the publics’s eye. Apparently, the writers are all aligned with the government.

Who Protects the Tax Payer?
The impact of the tax is going to be disastrous to business. With two thirds of our economy based on consumer spending, Californians will simply have less to spend. This will cause more unemployment throughout the state as companies simply cannot hire. The California Government has just crushed aggregate demand. Tax receipts will also decrease as Californians buy goods under the table, purchase more goods online, and simply now have less to spend due to higher levels of unemployment.

Low taxes work, but high unjust taxation does not necessarily increase tax revenue. Lowering taxes increase employment as consumers can inject more of their dollars into the economy at the very time the economy most needs the consumer to spend.

The lessons of history are before us. We must execute extreme skepticism when the government announces a temporary law. So often we find that these temporary laws become permanent and slowly bound us to a road of serfdom. Of course we have to keep in mind that we should entrust the government bureaucrats with our money since they know what is best for us… right?

Credit Card Rewards Are Falling Fast!

As the economy continues to deteriorate credit card companies are reducing rewards as a way to lower expenses. The typical leaders in credit card rewards cards such as Chase have introduced new programs that are just not as lucrative. New Chase card members can only receive 3% bonus cash back on gas, groceries, and fast food purchases for the first 6 months. They really provide no incentive for users to stick with the card for a time period longer than six months.

There are less incentives to sign up for new cards. In fact many companies have really scaled back on their marketing budgets as a way to preserve capital. New customers are now consider a liability.

Companies are also lowering available lines of credit. American Expression has been known to monitor user’s spending habits via credit card transitions and try to see if the user has changed their behavior which might indicate future problems with the subscriber’s ability to pay off debt. For example, if they noticed that a shopper used to shop at Nordstrom’s is now at Wal-Mart, they might reduce the credit line. While this may not sound very fair it is something that can happen so watch out!

The best advice right now is to use credit wisely and try to limit credit card debt.