If Alfred Hitchcock was alive, he could make a horror movie about sales taxes in California. It would be a sequel to “Vertigo.”
Anyone with a fear of heights should be terrified. The cities of Palmdale and Lancaster have the highest sales taxes in the state, 11.25%.
It may be news to many California residents, but state law limits total sales taxes to 9.25%. According to Revenue and Taxation Code section 7251.1, the combined rate of all local sales taxes added on to the state tax rate of 7.25% “may not exceed 2 percent.”
But Lancaster and Palmdale are not the only cities staring down in terror from far above that height. There are 18 cities in California where the sales tax is currently 10.75%, including Culver City, Glendora, Santa Monica, Irwindale, Compton and six other cities in Los Angeles County.
Californians in 42 cities pay a sales tax of 10.5%, and 20 cities are at 10.25%. In another 77 cities, businesses must collect a sales tax between 9.38% and 10%.
And it’s about to get much, much worse.
Consider the Bay Area city of Hercules, California, with a population of about 26,000. The total sales tax collected in Hercules is currently 9.25%. That’s supposedly the legal maximum, but the legal maximum can be changed by the state legislature. That’s because the 2% cap on local add-on sales taxes is not in the state constitution, it’s in the Revenue and Taxation Code. If the legislature writes a new law and the governor signs it, the sales tax can climb to new heights.
On January 5, Senate Bill 762 was gutted of all its language and amended into a bill that would allow the sales tax in the city of Hercules to go up another 1%, stating that the increase “shall not be considered for purposes of the combined rate limitation established by Section 7251.1.” This law is a “special statute” that the legislature “finds and declares” is “necessary” because of the “unique fiscal needs of the city of Hercules.”
That’s how the trick is done. In 2023, the legislature passed Assembly Bill 1679 to enable a sales tax increase of one-half percent in Los Angeles County for homeless services. A “citizens’ initiative” then proposed a higher sales tax for homeless services, Measure A in November 2024, to permanently raise the sales tax in L.A. County by one-half percent.
Under the state constitution, local taxes must go on the ballot for voter approval. This is a taxpayer protection added to the constitution by Proposition 13 in 1978, which also said “special taxes” require a two-thirds vote to pass. The courts defined “special” to mean tax measures that directed the revenue to a particular purpose, as opposed to general taxes, which required only a simple majority.
Measure A was a special tax. It did not receive 66.7% of the vote, only 57.78%. It was declared passed, and the sales tax in L.A. County went up. Measure A will collect an estimated $1 billion a year from people who are trying to pay their own bills, and the money will fund lucrative contracts for the organizations that paid for the “citizens’ initiative” campaign for the tax increase.
How was this trick done?
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Long story short, it’s now possible for local governments, working with special interest groups and state lawmakers, to erase both the two-thirds vote protection and the 2% cap on local sales taxes.
Currently in Los Angeles, the firefighters’ union is circulating a “citizens’ initiative” to raise the city’s sales tax from 9.75% to 10.25%.
The sales tax in L.A. was only 6.5% when Alfred Hitchcock died in 1980. He missed out on a blockbuster.
Write [email protected] and follow her on X @Susan_Shelley
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