Today I released a dynamic analysis by the Board of Equalization showing that the Governor’s proposed sales tax increase will cost California jobs.
According to the analysis, a higher sales tax rate will take money out of the pockets of working Californians, destroying more than 23,000 jobs and $267 million in business investment.
These projected job losses are equivalent to every worker in a medium-sized California city like Glendora or West Sacramento losing their jobs.
When considering tax increases, policymakers often rely on static analyses that ignore behavioral changes by consumers and business owners. A dynamic analysis estimates the likely behavioral changes that could result from a higher tax rate.
The BOE analysis projects that nearly all of the proposed sales tax increase would be passed along to consumers. The state would receive $222 million less in revenues than projected by a static analysis, an 8% loss in potential revenue.
Since July of last year, lower tax rates have enabled Californians to keep more of their hard-earned dollars, and our economy is growing stronger. Let’s not rewind our progress by reinstating even a portion of the higher tax burden Californians endured during the Great Recession.
The full BOE analysis is available online.