Posted on 06/30/2009 6:52:59 PM PDT by ZGuy
For the second time this year, a sales tax increase is going to cut into the profits of David Lynch, owner of Sacred Grounds coffeehouse in downtown San Pedro.
"I have to absorb it unless I raise my prices," Lynch said of the half-percent increase that takes effect Wednesday everywhere in Los Angeles County. "And with things being the way they are, this is no time to raise prices.
"We'll have to absorb it for now. But I'm not happy about it."
The county sales tax is climbing a half-cent on the dollar to 9.75 percent because of voter-approved Measure R, which is expected to generate $40 billion for local transportation projects over the next 30 years.
Supporters of Measure R note that the tax revenue will help alleviate traffic congestion through improvements expected to create as many as 212,000 jobs.
Voters in Los Angeles County approved Measure R last November, several months before Gov.Arnold Schwarzenegger imposed a 1 percent state sales tax increase - which began April 1 and will expire in 2011 - to help whittle down California's $24billion dollar budget deficit.
Measure R is expected to generate revenue to help build a $4.2 billion subway linking downtown to the Westside, an $800 million rail line linking Pasadena to Montclair and a $200 million extension of the Green Line rail to Los Angeles International Airport.
Jack Kyser, chief economist for the Los Angeles County Economic Development Corp., said the half-percent sales tax is a boon to the region despite concerns that the higher tax comes as consumers are coping with record-high unemployment and rising gas prices. "You have a lot of things out there taking a toll on people, but over the long run this will be beneficial to us," Kyser said. "We are creating a nice mass transit system."
South Bay chambers of commerce have supported the transportation measure, hoping it will help ease traffic gridlock and bring long-desired rail connections to other parts of the county.
The Metropolitan Transportation Division's Harbor Subdivision, an old freight rail corridor that some day might link the South Bay to the county's passenger rail grid, could receive financial support from the sales-tax based measure.
"People are tired of the traffic," said Marna Smeltzer, CEO of Redondo Beach Chamber of Commerce. "We felt if we don't start doing something now, it's only going to get worse.
"This will connect us to downtown, Santa Monica and Long Beach."
But Lynch, the coffee shop owner, and other merchants fear the additional tax hike will drive penny-pinching families to shop online to avoid sales taxes or search for rock-bottom prices at mega-size discount stores to save costs.
Paul Comon, owner of Paul's Photo in Torrance, said he struggles to compete with online retailers that can sell merchandise similar to his without charging sales tax.
"The major difference is that, if a person wants to buy from an online source, the difference is just getting bigger and bigger," Comon said. "We had issues with (the sales tax) when it was 8.25 percent. Every time it goes up, the issue just exasperates itself."
Customers at 99 Cents Only Store in Gardena will likely complain about the additional pennies they will have to pay per item, assistant manager Marisol Tenblador said. But they probably won't buy less.
"Some people say it's not fair to pay more tax because we work so hard for the money," Tenblador said. "But the customers complain for everything."
Alex Oldham, co-owner of Good Night Mattress stores in Rancho Palos Verdes and Redondo Beach, said he is offering a no-sales-tax promotion now to motivate consumers. But he doesn't expect the tax hike to hurt business.
"It goes hand in hand with everything that's going on in the economy," Oldham said. "We are figuring out ways to provide (customers) with the service they deserve. People are mindful of what they're spending. All of these increases are important - they add up."
Jerry Nickelsburg, a senior economist with UCLA's Anderson Forecast, said the additional sales tax will make consumers cut back on purchases.
"That's not a good thing when a large part of this recession is about consumers not buying," Nickelsburg said. "In order to bring consumers in, stores are going to have to absorb some of this increase by reducing prices a bit."
The additional half-percent sales tax means an extra penny for a $3.25 medium-size Starbucks latte. But it means an extra $7.50 for a $1,500 plasma TV with a 50-inch screen. And it adds $96 to the price tag of a basic Mini Cooper car selling for $19,200.
Stuart Waldman, president of the Valley Industry and Commerce Association, said hundreds of jobs will be created by the transportation projects - a perk for the county at a time when unemployment stands at 11 percent.
Just one year ago, the county's unemployment was 5.9 percent, according to the Kyser Center for Economic Research.
"It's going to pump money into the economy," Waldman said. "It will create jobs, and it will be beneficial."
The owner of South Bay Softub, a hot tub dealer in Torrance, said he has to appear to have reasonable prices no matter what the sales tax rate is.
"On a $4,000 item, that's a good chunk of change," said the owner, who did not want to give his name. "I'll adjust. I'll drop my prices just to be within reason.
"You don't want to lose business. In this economy, you try to help people out."
Yep, raising taxes always works, yep. ;-)
When these people can no longer afford in Kollyvornia, we need to bar them from Texas or ANY red state when they flee.
"It's going to pump money into the economy," Waldman said. "It will create jobs, and it will be beneficial."
BAHAHAHA. Name one instance when raising taxes created jobs (other than government jobs)
Just like murder town Chicago. ChiTown I think has a 105 sales tax.
Here in MA it just went from 5% to 6.5% for the children.
If you couldn't stop them at the Mexican border, how will you stop them at the state border? Most entered through Texas on their way to California.
Hey. It was just a thought.
This is sad for Texas.
It reminds me of New Hampshire having to deal with us MAssholes invading them.
Locust liberals... they stripe an area clean of all it's wealth then move on
Crank up the sales tax % NOW before the giant inflation hits!!
Woohoo.....
Heyup
Look what they did to Maine
I’m driving to Jackson, NH tomorrow morning for a 2 night rest.
3 hr drive. should be fun though.
Wish i didn’t have the MA plate, it might as well read as “Sucker” up there.
The NH bordertowns are REAL happy over or many new tax increases.
These immigrants, and the fruit of their poisoned vine (anchor babies) have neither the sophistication to understand the implied hardship nor the experience to understand the consequences of this confiscatory burden when compared to their standard of living in Mexico.
LA County's sales tax could rise to 25% and their existence in the county would still be heaven compared to their lifestyles in Chihuahua, Sinaloa or Zacatecas.
I have a friend that is moving out of CA. She said she can’t afford to live there. Major Lib.
I told her if she moves out of state, to leave the loser politics behind. We don’t want to get screwed up like her kind screwed up CA.
It’s 10.25% in Crook County, Illinois.
Wow! Hundreds of jobs will be created!! Out of a population of 10,000,000!!
Economic miracle workers those liberals are!
Is there any way we can extend the border fence up the spine of Cali.? Maybe all the way up to Seattle?
That would be cool! then set charges along the faultline!
Just kidding!
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