The Golden State has a bad reputation among lovers of freedom. And with residents in 51 California cities now having to pay even higher sales taxes, it’s not hard to understand why.
Described as “one of the least free states in the country,” California has been consistent on making it hard for both the average resident and the entrepreneur to thrive, taxing its locals so fiercely that it has pushed millions out of the state. Notwithstanding, legislators still see no problem with raising taxes.
Once again, they are helping to make California even less affordable to residents of all income brackets.
Statewide, the average sales tax rate is 7.25 percent. But cities like Sacramento, West Sacramento, Lodi, Roseville, and other Bay Area towns, as well as the entirety of Sonoma County, will see a considerable increase. Some cities are even getting a full 1 percent hike.
In cities like Los Angeles the rate is much higher, 9.5 percent. And in others like Burbank, Avalon, Commerce, and Culver City, consumers and business owners have to deal with a 10 percent or higher rate.
Things are so bad that not even online shopping is spared.
According to a local CBS affiliate, a 2018 Supreme Court decision allowed California to force out-of-state retailers to also collect sales taxes on purchases made within the Golden State. This reality will, undoubtedly, hurt firms trying to do business with Californians in the long run.
A Sales Tax Is an Income Tax
While rates may not seem high and residents may dismiss hikes as lesser of a problem than other types of government-imposed burdens, it is a sales tax that potentially reduces the producer’s income.
As Murray Rothbard explained in Man, Economy, and State, a sales tax doesn’t penalize only consumers. It actually hurts “incomes of original factors” by reducing them over time, hurting businesses and producers as well as consumers. This leads to a type of taxation that is more like an income tax than anything else, as it “reduce[s] the consumption and the savings-investment of the taxpayers.”
Sales taxes are often called a “better” type of tax by some free marketers who cannot see that the practice is also a tax on income. But the reality is that a sales tax hurts the economy as a whole. And California, a rich state that ranks first in the nation in poverty, isn’t a stranger to ignoring the laws of economics.
To locals, burdens will eventually add up. And as companies go out of business or simply pack up and leave, California legislators will continue to find ways to punish those who persevere. Oblivious that the more they try to extort from the taxpayer and the business owner, the less likely they are to stick around.
If helping the average Californian was the goal, taxation would be abolished altogether. But we simply cannot trust a politician with putting his money where his mouth is.
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