For Local Governments, To Tax or Not to Tax, That is the Question

Joel Fox
Editor and Co-Publisher of Fox and Hounds Daily

Against the background of the economically devastating coronavirus plague (not in any way to minimize the ultimate tragedy now of lives lost), governments are trying figure out how to handle their lifeblood–taxation. The feds put off income tax collection until July 15. The state of California did the same. Meanwhile, there has been pressure to push back the property tax due date past April 10 in the state. But what should local governments do about the projected hundreds of taxes being considered for November? 

Recall that there were 237 local tax increases and bonds on the March ballot. In recent history, hundreds of local tax measures have appeared in each California statewide election. It’s safe to assume that is the expectation of this November’s ballot, but should it be? 

Given the pandemic blow to the state’s businesses and taxpayers should governments, which will certainly feel the effects with fewer dollars in their budgets, push tax increases in a difficult economic time? 

Enough with the questions. It says here, local governments should hold off now. Even if the health crisis subsides and the economy bounces back (helping to replenish government coffers), taxpayers and businesses will still be licking their wounds for months following the coronavirus economic calamity. 

Headed by the California Taxpayers Association and the Howard Jarvis Taxpayers Association, about 75 business and taxpayer groups asked Gov. Gavin Newsom to issue an executive order to delay the April 10 property tax deadline to July 15. The letter sent to the governor argued that putting off the property tax collection would not be crippling because taxes on all business personal property already has been fully paid; the first installment of 50% of the property taxes on the secured roll was paid in December, while some property taxpayers paid in full the end of last year; and more than half the homeowners use impound accounts that will pay taxes by the deadline.  Local governments would receive all that money. 

The California State Association of Counties (CSAC) and the California Association of County Treasurers and Tax Collectors oppose delay. In a joint statement, they said: “Taking care of Californians is our top priority, and counties, cities, and schools are burning through local reserves to do so. Any delay in payments beyond the April 10 property tax deadline, for individuals or businesses that can pay, will tip local governments into insolvency at a time when our residents need us the most.” 

At least two counties have put off property tax collection until May 4 while others are suspending any late fees. 

While expected taxes to maintain government functions is an argument the associations are leaning on, pushing for new taxes is an altogether different matter. 

There are a couple of tax measures in Los Angeles County cities facing voters next week. In May, there is a scattering of tax measures throughout the state. But one tax, a business head tax in Palo Alto destined for the November ballot, has already been pulled because of the economic situation. 

Yet, other local governments are taking the “damn the torpedoes, full speed ahead” attitude at a crucial period. 

Yesterday on this site, W. Bruce Lee, president of the Sacramento Taxpayers Association, admonished the Sacramento Transportation agency for rushing a tax measure forward in this difficult time.

Considering we are in the throes of an economic tornado, governments should hit the pause button on considering new taxes. Wait until the crisis passes to see how deeply scarred the state’s businesses and taxpayers are. Wait to see how strongly and how swiftly the economy comes back. Don’t apply more burdens on the taxpayers at a time of crisis. There is time to qualify measures for the November ballot—if they are necessary. But, that is another discussion.

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