This insightful comment was from 28 year old Jonathan Owens, resident of Berkeley, in response to Governor Schwarzenegger’s (D-CA) proposal to temporarily raise the sales tax by 1 cent. Jonathan further comments that raising the sales tax would be better than laying off state employees…

“I’m definitely down with a penny (on a dollar). I probably wouldn’t even notice,”

[From Governor proposes one-cent sales tax increase]

Here’s the problem with Owens’ statement, he looks at the sales tax purely from an individual purchase standpoint and not in the aggregate. Let’s agree, just for a moment, that the average Californian purchases $15,000 of taxable merchandise in a year (clothes, gasoline, taxable services, furniture, useless crap, etc.); from this perspective a 1 cent sales tax increase isn’t “a penny on a dollar” but rather $150… if I told Jonathan he was going to pay another $150 in taxes next year would he opine that “I probably wouldn’t even notice”? I doubt it.

Furthermore, this sales tax proposal is coming on the back of many local initiatives to tack extra points on the sales tax. In LA County it is quite possible that next year they could be looking at a 9.75% sales tax if the Governor’s proposal is adopted. Imagine going in to buy a new car in an effort to cut down on fuel costs and discovering that the new Prius you have your eye on is going to cost you $2,500 in sales tax on top of the purchase price and probably another $500 for the DMV registration fee (just another word for tax).

I can’t imagine a more near term devastating economic policy in our current environment than increasing a regressive consumption tax that hits the working poor and middle classes the hardest. California requires serious solutions to a long term structural budget problem, not a quick fix that puts yet another bandaid over the problem for future generations to deal with.