City, state considering sales tax increase
The South Lake Tahoe business and civic community anxiously wait for the ax to fall from a sales tax increase Gov. Gray Davis has proposed to close a nearly $35 billion state budget gap.
Davis has pledged to send a plan to lawmakers to hike the sales tax by 1 cent on the dollar. The current tax amounts to 7.5 percent in El Dorado County and South Lake Tahoe, a city that fears the state may beat its plan to the punch.
To get a glimpse of the governor’s proposal, take a $5 salami roll that’s now taxed 38 cents. The tax plan would add a nickel to that sale.
But if you take into account a $10,000 vehicle, the sticker shock amounts to more. That would be $100 on top of the $750 buyers now pay.
As part of a long-range plan to fix its own annual budget woes, the city is considering petitioning the state to jack up the sales tax in South Lake Tahoe on the $400 million that is generated annually in retail sales.
It takes voter approval though, and business and city officials are apprehensive about whether the community will support back-to-back increases.
Mayor Judy Brown rests her confidence in the Legislature to keep the tax rate in check.
“I’m not sure if the Republicans would go for it,” Brown said Wednesday.
Brown, for one, is afraid the governor’s plan will scuttle one of the city’s few opportunities to gain much-needed revenue.
South Lake Tahoe Chamber of Commerce Executive Director Duane Wallace agreed.
Wallace said he would like to see the state use the city as an example in spreading the responsibility, including “taxing little, making cuts and investing in the economy.”
“The state spends its way into the crisis, and it ought to cut its way out,” he said, pointing to the state’s complete about-face from a budget surplus of a few years ago. Since then, the state has lost $45 billion in an overinflated energy market.
The problem has been exacerbated by state investments in a flailing stock market.
“I know every time (the state gets) into trouble, cities get hurt,” City Manager David Jinkens said.
Retail businesses could make the same argument — from small to big-ticket purchases.
Car dealerships are split on the anticipated effect.
Mark Shehadi of Shehadi Motors believes the impact may be minimal because most vehicle buyers have their minds made up by the time they get hit with the sales tax amount.
But South Shore Motors General Manager Zak Salah countered with a different perspective.
“In our industry, it’s obviously going to change my business,” Salah said. “Any time there’s a tax raise (by the state), it’s going to hurt everybody’s business.”
Jim Warlow of The Cork & More reiterated that notion and continued with another concern that a tax increase would chase retail out of the state.
Most agreed that whether a tax increase creates an underground cash-and-barter economy in South Lake Tahoe remains to be seen for small retail businesses trying to avert reporting tax collections to the city.
“There might be a chance of that,” Warlow said.
Kmart Operations Manager Brett Fielder said he’s heard of a barter business subculture in town.
Fielder believes the mass merchandisers 60/40 percent ratio of tourists vs. local residents keeps the cash registers ringing, as visitors who vacation with money tend to refrain from quibbling over a dollar or two.
To keep the South Shore residents satisfied, Fielder said the store plans to woo them by bringing back mainstay items like lamps. Two years ago, it was difficult to find a lamp in town.
— Susan Wood can be reached at (530) 542-8009 or via e-mail at email@example.com
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