Local Tax Increases Slam Californians

A customer enters a Block Advisors tax preparation office in San Anselmo, Calif., on April 15, 2019. (Justin Sullivan/Getty Images)

Commentary

When I was at the Orange County Register writing unsigned editorials, from 1987 to 2016, we made sure always to oppose every local tax increase—including “bonds,” which I called “delayed tax increases,” because that’s where the money eventually comes from. Local and state governments can’t print their own money, unlike the federal government.

Although we sometimes lost, especially with school bonds, we usually defeated the increased levies. Even when we lost, every local government knew it would face the gauntlet of several editorials, and likely signed columns, blasting them for assaulting the taxpayers.

By contrast, the Los Angeles Times backed almost every tax increase put before it. The result is Orange County has lower taxes and is much more livable than Los Angeles.

That’s confirmed by a new study (pdf) by the California Tax Foundation, titled “Local Tax Trends in California: A Survey of Ballot Measure Elections from 2010-2020.” It found over that decade such taxes increased by $8.82 billion a year statewide. Voters rejected just $3.17 billion in tax increases.

On the positive side, Proposition 13 saved taxpayers $2.4 billion a year. The 1978 tax limitation measure requires two-thirds voter approval for taxes earmarked for special purposes. But if only a majority vote had been required, taxes would have gone up that higher amount.

I gleaned several key things from this study. Here’s some of my analysis that goes beyond their data.

Although the study does not break down the 58 counties, it does so for seven regions. The Southern California region includes Orange County and the two areas most like it: San Diego County and the Inland Empire. These areas are largely urban but more conservative and Republican than the rest of the state’s populous areas.

Hotel Tax

Consider the voter approval of hotel taxes, also called the Transient Occupancy Tax (TOT). These are popular because the locals “don’t pay for them,” only visitors who don’t live and vote there—except tourists and convention groups sure do consider price. A higher TOT means fewer people not only occupying hotel rooms, but fewer patronizing local restaurants, tourist attractions, and stores.

Here’s the tally of the seven regions for 2010-2020, from lowest passage rate to highest:

It’s a textbook in social illusions. Los Angeles and the Bay Area, with passage rates above 80 percent, are plagued with increasing homelessness and crime. They “solve” the problem with higher taxes to pay for more social programs, which don’t work. But the taxes make living there harder.

Meanwhile the Central Valley and Southern California, with passage rates around the 50 percent rate, are doing much better.

Utility Users Taxes

Another tax localities love to impose is Utility Users Taxes (UUT). Hey, it’s just a user fee. You don’t want the infrastructure to collapse so you miss the latest Netflix binge, do you?

Here’s the breakdown, from lowest passage rate to highest:

Aside from the anomaly of Northern California passing all its UUT increases, the numbers show more reluctance when a tax boost hits voters’ own pocketbooks directly. Yet the general pattern holds, with Southern California and the Central Valley more reluctant to jack up taxes than Los Angeles and the Bay Area.

Conclusion: Will It Continue?

Next year brings another election cycle. Taxes and bonds again will clog ballots. But will these high passage rates continue?

They may not. Especially after COVID-19 slammed family and business budgets, Californians seem more skeptical of taxes, and of government in general. The word also is getting out that, as Jon Coupal of the Howard Jarvis Taxpayers Association puts it, nowadays all tax increases go to the bloated pensions of retired government workers—that is, to those no longer performing actual services for the public.

With kids back in the classroom, school districts soon will have accurate numbers on how many kids now are being homeschooled. EdSource reported in July, “During the height of the pandemic, almost 35,000 California families filed an affidavit with the state to open a private home school,” more than double those of the previous year.

Public schools will have difficulty advancing tax increases if attendance numbers are down. And it’ll also be hard to convince homeschooling families to back tax increases for services they won’t even see.