Tonight, at midnight, California will hike its tax rate 1%. I have already written about how California is too expensive for most and this is only going to exacerbate the situation.
This now puts tax in the county of Los Angeles at 9.25%. In many places in California, you are now flirting with 10%. This is on top of one of the worst recessions we have seen in our lifetimes. This will no doubt have an effect on consumer spending. While it may seem small to some keep in mind you just eliminated 1% of spending power for all of California. That is going to have a multiplier effect and ripple through all parts of the country. It is not like people have money saved and can dip into their savings or savings rate and just absorb the 1% hike.
Further, this is getting into the territory where people are going to start to simply avoid the tax. I expect more Californians to start buying online at places like Amazon where they can avoid paying California sales tax. I have no plans to move out of the sunshine anytime soon, but they are making it very hard for me to justify living in California. All I hear on the radio is how L.A. County is about to layoff thousands of teachers. At the same time we have one of the worse education systems in the country. But we are about to dramatically raise taxes. I wrote it before, but I really want to know, where the heck is California spending all of its money?