Kicking the Sales Tax Habit

Once long ago in California, property taxes financed services that benefited homes and their inhabitants -- police and fire protection, parks, libraries, schools. That connection has eroded to almost nothing, in part because of property tax limits and cuts imposed by Proposition 13 in 1978 and in part by the state’s taking of about $4 billion a year of local property tax receipts in the early 1990s. The Legislature has a chance this year to reverse the ills that grew from this shift, and it should leap at the chance.

Cities and counties are addicted to income from sales taxes. Of the sales taxes that people pay on clothes, autos and other goods -- 8.25 cents per dollar in most of Los Angeles County -- one penny is returned by the state to the cities and counties in which the sales occurred. Cities and counties wage war with each other to land huge auto malls and high-volume stores such as Wal-Mart for the cash they will bring to local treasuries.

These big cash generators, often lured by tax breaks or other concessions, create the worst kind of sprawl, requiring costly police and fire support and traffic control. City shopping areas wither. Cities and counties have no incentive to develop new residential neighborhoods and nonretail commercial properties, which are accompanied by high-paying jobs. Property taxes go to the state, so why bother?

Both Democrats and Republicans vowed to fix this skewed growth. But no one came up with a practical and politically acceptable solution. Last year, Assemblyman Darrell Steinberg (D-Sacramento) proposed a trial program of revenue-sharing among Sacramento-area local governments. It bogged down in complexity and bickering. Now Steinberg has a new plan that is amazing in its simplicity, drawing broad support from developers and businesses. It is backed by some Republicans. In fact, Assemblyman John Campbell, a conservative Republican from Irvine, is co-sponsoring Assembly Bill 1221, which is awaiting its first hearing.

The measure merely reduces local government’s share of the sales tax from one cent on the dollar to half a cent, roughly $2.5 billion annually statewide. In exchange, the city or county gets a corresponding increase in property tax revenues now going to the state. The counties back the plan, but the cities fear that property tax revenues will not grow as much as sales taxes. That’s the addiction speaking.

With smart growth rather than big-box sprawl, maybe those new high-salary jobs will buy houses, stimulate local business and generate more property taxes for the cities and counties. That means more pleasant communities, a winner from any angle.