Sunday, February 22, 2009

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?

1 comment:

Anonymous said...

oh yeah ;)