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Without intervention, sales tax set to lower

June 23, 2011 12:00:00 AM PDT
The temporary state sales tax increase that went into effect two years ago is about to expire. And even though the state budget is still up in the air, Governor Jerry Brown wants to keep those tax hikes going.

With the new fiscal year about to begin next week, lawmakers are blaming each other for the lack of a state budget. Meanwhile, businesses across the state are in limbo, wondering whether they'll be charging the correct sales tax.

Californians might want to postpone major purchases another week. A temporary 1-percent sales tax increase enacted two years ago is scheduled to expire at the end of the month.

The California State Board of Equalization has already told businesses to adjust their cash registers to reflect the decrease, starting July 1.

"In many instances, retailers would have to call in a programmer and have a programmer actually makes changes to the cash register, and all that takes time and coordination and effort," said Anita Gore, a spokesperson for the Board.

Because negotiations on the state budget are at a standstill, it appears increasingly likely there won't be a deal in time to stop the tax decrease.

"Republicans have no plan on extending the taxes or voting for new taxes," said state Assemblywoman Connie Conway (R-Tulare), the assembly minority leader. "They will expire."

Governor Brown, though, still has his hopes pinned on winning two Republican votes in each house to continue those temporary tax hikes -- what's known as "Plan A."

"This stuff changes. Sometimes they blow hot. Sometimes they blow cold," said Brown. "I'm not giving up. I'm going to keep working until we get those tax extensions, and we will get them."

But with the lower sales-tax rate around the corner, even Democrats see the writing on the wall.

"Is Plan A dead? I'll leave it to the governor to announce the wake and the funeral services," said state Sen. Darrell Steinberg (D-Sacramento), the senate president.

If by chance, a budget deal could be reached by June 30 to keep the higher rate going, businesses could be in a lurch because their registers are already programmed to charge the lower sales tax. It will be impossible to change it back overnight.

"They are still going to be liable for the payment of that tax to the state, whether or not they collect it from the consumer," said Anita Gore.

The Board of Equalization estimates that the average California household will save $233 a year with the 1-percent decrease. But that also means the state will have $4.5 billion less in taxes, and Democrats say that could mean more cuts to schools and public safety.


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