CSAC Bulletin Article

New Year, New Lower Statewide Sales Tax Rate

January 5, 2017

On January 1, 2017, the statewide sales tax rate dropped a quarter of a percent, back to its original rate before voters approved Proposition 30, The Schools and Local Public Safety Protection Act of 2012. Prop. 30 provided for an increase in both the personal income tax and statewide sales tax rate to bring more money to education and healthcare programs. In light of its expiration, the statewide sales tax rate has lowered from 7.5 percent back to its previous level of 7.25 percent.

It should be noted that the rate change does not directly affect county revenue streams. The reduction impacts the percentage of the sales tax that goes to the state general fund, not the percentage that goes to county realigned programs. While the LAO estimates that state sales tax revenue will slightly grow in the next two years, in the next economic downturn, those revenues are likely to fall, meaning less money for the state’s general fund. As a result, the reduction could have an impact on the Administration’s budget decisions, especially when the Governor is committed to maintaining a healthy reserve and a legacy of leaving California in strong fiscal standing for the next administration.

All of this information will factor into the Brown Administration’s budget decisions and help frame the Governor’s January Budget which must be presented to the Legislature on or before January 10. CSAC will provide a full Budget Action Bulletin with proposed budgets for key county programs upon its release.

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