With over a 70% favorable vote, Measure M passed in Los Angeles County in November of last year. Per LA Metro’s webpage voters were asked to vote for the measure:
To improve freeway traffic flow/safety; repair potholes/sidewalks; repave local streets; earthquake-retrofit bridges; synchronize signals; keep senior/disabled/student fares affordable; expand rail/subway/bus systems; improve job/school/airport connections; and create jobs; shall voters authorize a Los Angeles County Traffic Improvement Plan through a ½ ¢ sales tax and continue the existing ½ ¢ traffic relief tax until voters decide to end it, with independent audits/oversight and funds controlled locally?
This sales tax increase brings the tax rates in cities in Los Angeles County to a minimum of 9.25%, up from 8.75%. However, in certain cities in the county the rate is higher due to special district taxes, going as high as 10.25%. Despite the overwhelming vote in favor of this tax increase, there is likely some “above-sticker” shock for consumers in certain municipalities where the sales tax is exceeding 10% for the first time. A BOE press release (here) breaks down the tax rates in a handy chart:
|County/City with New Tax Rates as of July 1, 2017||Old Rate||New Rate|
|Los Angeles County (the 9.25 percent tax rate applies to all unincorporated areas and cities* that do not have district taxes)||8.75%||9.25%|
|City of Avalon||9.25%||9.75%|
|City of Commerce||9.25%||9.75%|
|City of Compton||9.75%||10.25%|
|City of Culver City||9.25%||9.75%|
|City of Downey||9.25%||9.75%|
|City of El Monte||9.25%||9.75%|
|City of Inglewood||9.25%||9.75%|
|City of La Mirada||9.75%||10.25%|
|City of Long Beach||9.75%||10.25%|
|City of Lynwood||9.75%||10.25%|
|City of Pico Rivera||9.75%||10.25%|
|City of San Fernando||9.25%||9.75%|
|City of Santa Monica||9.75%||10.25%|
|City of South El Monte||9.25%||9.75%|
|City of South Gate||9.75%||10.25%|
You can find the sales and use tax rates for any city in California by clicking here and typing in the address where you conduct sales or intend to make your purchase. Sales tax is a major source of revenue for cities, but it is more of a boon for some cities than it is for others, as certain cities tend to have more retail businesses and retail sales. Small cities with bustling downtowns and malls benefit from money spent by consumers who cross city lines to shop. Here in Orange County, the City of Brea comes to mind as an example.
In addition, while sales tax affects everyone and everyone pays the same tax on the same purchase (with some exceptions like sales for resale or out of state sales), consumer purchases represent a larger percentage of the disposable income of lower income individuals. Unlike federal and state income tax, the sales tax system is not progressive or graduated with gradually increasing brackets. Depending on your point of view, shouldering the costs of local infrastructure improvements through sales tax could be perceived as more fair (everyone uses infrastructure) or less fair (those who are already struggling are asked to pay the same rate as those with more). Of course, everything is more complicated than that.
Daniel W. Layton, the author of this post, is a former IRS trial attorney and ex-federal tax prosecutor. He handles sales and use tax cases in Orange County and Los Angeles and helps clients in a variety of IRS and state tax cases.