When the state of California raised the sales tax by another 1% on April 1, 2009 I was pretty pissed. What kind of government expects their residents to pay a whopping 10% tax on everything they buy? Pedro doesn't want to pay $200 in taxes on his $2,000 60-inch LCD TV. Nancy shouldn't have to pay $300 more on her $3,000 diamond encrusted bracelet. And I certainly don't want to spend $5,200 in taxes on a handsome $52,000 BMW! That's just ridiculous!
We the people of California deserve our luxury items just like every other parrot-brained consumer in America. Who's to dictate what we can and can't waste our hard earned money on? Certainly not some bureaucrat in Sacramento counting all his money under the table, no way!
GOVERNMENT WANTS YOU TO SAVE WHILE THEY SPEND
I was angry about the mismanaged state of our budget and so I went on strike. I cut down my purchases so drastically that by April, 2010, one year after the sales tax raise, I literally had over $20,000 in extra spending money in the bank. You see, I figure I spend about $20,000 a year for the past 5 years on stuff. This stuff includes automobiles, watches, shoes, clothing, musical instruments, computers and so forth.
I could accept paying 8.5%, or $1,700 in taxes on $20,000 a year in stuff. But, I drew the line at 10% and wasn't willing to support government waste, greed, and mismanagement by contributing $2,000 a year in sales tax. I'd rather just laze around and demand government help than contribute to a lost cause so I stopped consuming in California.
The $1,700 in California sales taxes I paid on average for the past 5 years literally declined by 95% last year. Whenever there is something to buy in California, I think about the 10% sales tax and get sick to my stomach. I end up putting the item back on the shelf and walk away.
THANK YOU CALIFORNIA
I just want to formally thank California for jacking up taxes so much. It's great that whether one is poor or rich, they are still going to have to pay the same 10% sales tax on basic necessities. So thoughtful of you guys! Without government mismanagement and corruption, I wouldn't be $20,000 richer today. I would have spent merrily all along, not thinking about where the tax revenue is going.
So thanks again guys for helping me save a boatload of money over the past year. You guys might as well increase the sales tax to 30% for all I care. You'll really crush your tax revenue by causing a halt in spending. Not only that, you'll just have people move out of California. Washington, here I come!
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I pay more in bottled water costs than I would in taxes. I have to buy the water, because the pipes in my metro area have only had patchwork since the Great Depression, and the water is periodically polluted with, among other things, lead and raw sewage.
So for the love of all that is holy, every time I hear so much whining about taxes this and taxes that, I really wish people would remember that taxes also buy us stuff. And if you’re not buying in to the cheaper economies of scale available through things like municipal water, you might be paying even more in other ways. (And before the Randians chime in, no, I do not believe the free market can or will provide a cheaper, more effective solution to a product that is necessary for basic human survival).
Hey Sam,
Great point about the demotivating effects of increased taxation. I do think that there will be a significant number of intelligent middle-upper class people that will just decide to ‘coast’ once taxes hit a certain threshold. It’s only logical since more effort will only put more money into the governments hands to waste.
California has a long way to go to recover from the mess they’ve gotten into and I definitely don’t plan on funding that recovery any more than I have to.
My best,
-Josh
Unfortunately, many are not as wise as you are, and will continue to spend and be raped by the taxes. Myself, I left California in the 90’s. The cost of living was too much for the lifestyle my husband and I wanted for ourselves and our family. Subsequently, we have lived very well in various less expensive areas and amassed a substantial retirment fund tin the process.
My town just raised taxes to 10%. I drive to the next town to buy anything.
You’re a stud! $20,000 in a year is awesome! Props to you. I hope to save that this year but the problem is it will go to the government to pay off loans!
Ha, not a stud, just a guy who doesn’t agree with forever rising taxes! Went ahead and went on strike.
Cheers
No worries with people stop working Sam. I pay 45% on my next dollar and I keep working for more ;-) hahaha!
I would feel better with a base taxe of 20% and a luxury taxe on goods. At least, I wouldn’t have the feeling that I pay for everybody all the time ;-). More thoughts on taxes on today’s post (great coincidence, isn’t?)
You should come to America! We LOVE people like you who LOVE to work more to pay 45% tax to help subsidize the 47% o Americans who don’t pay anything. Great attitude mate!
Wait, I’m confused? Obama keeps telling us that raising taxes is good for us and reminds us about how well the economy did under the Clinton tax rates. Surely, the government can make better use out of our funds than private industry and citizens, no?
no.
Canada is starting to look good. I think the VAT is 17%, plus the income taxes that are similar to ours. However, that cost includes all the health care. What do you get for 10% in California? Probably not that much service.
More insidious about CA is the aggressiveness of the state tax authority. I remember reading a story of a resident who bought a very expensive car. Because government knows your income and apparently can tie that purchase to it, they went after her to find out how she could afford such an expensive car. (At is turns out, she got a big lump sum from an insurance payout on her wrecked car – which she turned over as a down payment on the new car). Sick.
For 10%, we get some damn good sunshine and awesome nature!
What about the stealth tax in the debasement of the USD$.
Nobody complains about the dollar losing value or “real” inflation which is a tax that punishes hard working savers regardless of state…..
Sadly most people think this is a good thing because it “helps exports” which is a joke.
I’m a saver, and I don’t mind the weak dollar. There is no real inflation and rates will stay low for a looong time.
I am buying real estate now though. No brainer imo with rental yields at 7-8%.
I guess my experience makes me think you sound like a whiner. I paid 9.75% where I lived in the states and now I pay 15% in New Zealand.
I suppose you could always move to a state without sales tax. Try Oregon. It’s all California transplants so you’ll fit right in. ;)
Thanks for calling me a whiner. A whiner is someone who doesn’t do anything about their displeasure. I shutdown $20,000 worth of spending in protest of the increased tax.
Oh, don’t be sensitive. ;P I’m probably more of a whiner than you are over all. I hope your protest makes you happy. :)
Sam, I agree we pay more in taxes than most states, but our property taxes are much lower than same value homes in other states.
Plus, you can just order everything from Amazon.
I don’t think homes are the same value in California though. California homes are on average 30% more than the rest of America. In SF, the median home price is $600,000, or TRIPLE that of the national $190,000 median for example!
I would love to see the implementation of FairTax. Everybody pays their fair share of tax according to their own consumption. No more filing those pesky tax forms.
In Arizona our sales taxes on nonfood items are almost 10% and the state found a way to raise our income taxes without officially raising them, simply by recalculating the way they’re figured; the city of Phoenix recently slapped a tax on food and instituted fees to use city parks. Does the sales taxes keep me from buying big-ticket items? No…unemployment serves that purpose.
But when I have a chance & can get free shipping, I do buy things online instead of locally…and I’m not fessin’ up and paying local tax on those purchases.
In my country we used to pay 18% VAT on EVERYTHING. We didn’t have sales tax, we had VAT and every time you’d see a price it would already include VAT. It was a long time ago, so now I wonder if VAT stayed the same or was raised. Sales tax in the state where I live now is 6.85%. Comapring to Cali, we are damn lucky.
to Sandy’s point, sure, consumption tax , or sales tax is much more tolerable relatively speaking to other taxes given you have full control. to FS’s point, i agree . . . start buying camels and grow your own garden. times are changing :)
We pay 15 per cent GST. Count yourself lucky!
Would you be okay with this tax if there was no income tax in CA? Wasn’t one of your rec.ent articles about increasing the tax on everybody? This certainly is one way to do that. It’s kind of like a flat tax, except of course, that you also pay federal and state income taxes too.
I personally would be okay with taxing everything at 10 or 15% if it meant I could eliminate some other tax..but to do both, well that’s just lame.
>Do you think people will stop working as much once their Federal Income tax rates go from 33% and 35% to 36% and 39.5%, respectively?
Let’s say someone make 400k a year.
Next year they’ll pay an extra $4,500 in tax. (400k-250k)*3%
This is not peanuts, but if they are netting $33,333 a month, the extra tax ($375/month) shouldn’t be huge deal.
disclaimer: I don’t make more than 250k so I am talking out of my ass here.
Cool, at least you admit talking out of your ass! :)
Someone who makes 400K doesn’t net $33,333 a month, they GROSS that much. Their net is closer to $20,000 a month. Try paying $100,000 a year in taxes already and see how you feel if you have to pay $10,000 more!
For the work less if taxes increase question…I imagine this would depend on your line of work. If you are a salaried worker, then how would you deliberately work less to avoid paying more in taxes? I imagine this would generally apply to more hourly workers or people who, as Robert Muir said, have opportunities to earn “side income” or something. Of course, I am salary, so I can’t see taxes taking me down from 45 to 50 hours a week to 35 or 40! But I also make far less than 250k, so who knows!
on area one fails to consider is couples filing joint accounts. As my first dollar earned would be taxed at my husband’s top rate, it discourages me from going back to work after having kids, for certain. If I have to turn over almost 40 cents of my first dollar plus pay for childcare, parking downtown, etc.. it is absolutely the biggest financial factor in my decision to stay home.
Irony is that if there were greater financial incentive for me to return to work (ie, lower taxes), the federal government would most certainly be getting more taxes from my productivity.
A 10% state sales tax is ridiculous. That actually discourages consumption. I don’t think that a 2 to 3% federal tax increase is a disincentive to work. If rates ever go over 40% that is a different story.
Fed rate going to 39.6% if Obama has his way! Whoo hoo!
Dude, you’re not going to pay 39.6%; those in the middle class don’t pay that; they pay 23%.
Huh? If someone makes over $380,000 a year, Obama says the Fed marginal tax rate is going from 35% to 39.6%. You saying Obama is just kidding now?
Why would Obama kid about take money away from hard workers?
Other side of the country here in NY with the 2nd or 3rd highest income taxes (plus NYC taxes if you make money in NYC) and I am glad how else would I pay for all those fantastic non-congested roadways, how about all those on 99 weeks of unemployment, social security that seems to be working really well….
/end Sarcasm.
It should be noted that the state sales tax in California is actually 8.25%, not 10%. Cities and Counties DO levy their own additional sales taxes though, thus the higher taxes you see in some localities. Los Angeles for example is at 9.75% while San Francisco is at 9.5%.
@Everyday Tips
There an equivalent for the US?
Holy crap sam. Those taxes are outrageous! I know you’ve posted before about extending your retirement by moving to a state with low taxes, but Honestly I didnt really figure that the 1-2% that you would gain is all that big of a deal. I didn’t know you were paying 10% sales tax on everything you buy + a personal income tax. In Wyoming, the state charges 4% sales tax, and counties have the option to add more on. I think most counties have added on 1%, and I think 2 have added on a 6th percent, each asking citizens of the county every 4 years if they approve of a 6th penny in sales tax. The other 21 counties in the state have a 4% sales tax rate.
P.S. My thoughts on taxation: The most legitimate uses are for defensive military purposes, the courts, police, etc… in a couple of words: law & order. People need law & order to deal with each other and prosper. Beyond that I think that Bastiat has it right regarding unforeseen and hidden effects of every tax, subsidy, monopoly, nationalization, tariff, special-interest regulation, deficit, and inflation that is done. Nothing comes for free.
10%? I’m paying close to 15% sales tax and my marginal tax rate is at least 40% on income, yet I make quite less than 100k/year. ;)
Thanks for reminding us not to move to Canada to work or retire! I mean, if you guys had California and Hawaiian beaches, MAYBE! But Whistler ain’t gonna cut it!
Come south my friend to Washington State!
Lots of things I like about Canada, but taxation isn’t one of them. It would be cool if the US and Canada had something like the EU borderless agreement. As things stand today the US may as well be on the other side of the ocean.
Sounds good. As they say, “There’s no free lunch!” so not even free healthcare counts!