I heard that Governor Schwartzeneger repealed or cut or
stopped sales tax in California; and I was wondering if this
was true?
If this is true, was it across the board sales tax cut or
just on certain items? Was it for a certain limited time?
As others have said, it wasn't the sales tax, it was the
"car tax" that was affected. The car tax is an annual ad
valorem property tax on the value of motor vehicles that is
paid to the DMV along with the annual registration fee. The
revenue does not go to the state general fund, but is
distributed back to local governments (cities, counties,
etc.) and is a significant source of their revenue.
Just for clarification: the previous administration did NOT
"triple" the car tax. The car tax was gradually reduced
over a period of years by two-thirds, from 2% to .67% of
assessed value. The law that reduced the tax also provided
that the state would reimburse ("backfill" the local
governments for the lost revenue. It also provided that if
certain revenue targets were not met in future years, the
tax would revert to its original rate. In other words, this
is a tax cut we can afford to make now, but if conditions
change for the worse, it will automatically reverse itself.
Those targets were not met this year and the tax
automatically, according to statute, went back to 2%. The
Legislature could have enacted a law in 2003 repealing the
reversion statute, but chose not to do so, and the previous
Governor's proposed budget assumed that the state would no
longer need to backfill the local governments' revenue loss
from the reduced tax. However, there was no new law in 2003
"tripling" the car tax. It simply went back to its historic
rate in accordance with the law.
It isn't clear to me how the present Governor could change
the law by executive order, but everyone seems to agree that
his action was not illegal.
Katie in San Diego
The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.