Let the Sales Tax Yo-Yo

Remember the state’s economic boom way back in 1998-2000? Because of those flush times, Californians are enjoying a nice sunny-day bonus this calendar year: a quarter-cent cut in the state sales tax.

Didn’t notice? Well, the cut will save each person only about $31 a year. But that adds up to $1.2 billion in state revenue. And now that gloomier economic times are here the state needs every quarter-cent it can get to avoid making deep cuts in programs such as health care and education.

The quarter-cent was added a decade ago, when recession was slamming California. As a result of a political compromise, legislators crafted the law in a way that the amount would automatically be cut in good times and be reinstated in bad. So, at the end of this year, it’ll be back. Maybe.

Republicans, you see, want to cut that amount from the sales tax permanently, and they are threatening to block passage of the $100-billion-plus budget for the fiscal year beginning July 1. They’re being penny-wise and pound-foolish.

The tax was raised in 1991, with a provision that it would be cut again if the state had two consecutive years with budget surpluses amounting to more than 4% of the state’s general fund total. Since then, the state has enjoyed several billion dollars’ worth of other tax cuts as well, including cuts in the income tax and a major reduction in the vehicle registration tax. The state’s tax burden is now at about the national average, and there has been little clamor for more cuts.

Critics point out that by nature, sales taxes are regressive, hitting low-income people hardest because much of their income goes for necessities--even in California, where groceries and prescription drugs are exempt. Some moderate Democrats have expressed concern about letting the sales tax climb back to its previous statewide level of 7.25%. They don’t want to be depicted by their 2002 election campaign opponents as tax-raisers.

But this is not a new tax or a raised tax. It merely is reverting to its former level. If better times return, the tax cut will go into effect again. Rainy days are here. The prudent thing for California this year is to put this money to use on important state programs.