Governments Do NOT Need Rate Increases to Collect More Money

Contra Costa voters rejected Measure B in June, a proposed 0.625 percentage point countywide sales tax increase. Six weeks later the tax proposals keep arriving. The Connect Bay Area transit campaign wants another half a percentage point in Contra Costa and four other counties, and a full percentage point in San Francisco, for fourteen years. Clayton has placed a permanent one percentage point sales tax increase on its November ballot, projected to raise $1 million annually. San Pablo is looking to hike rates by 0.5 percent for five years and then by 0.25 percent for another five years. Hercules has not put anything on the ballot yet, but it has been preparing the ground. Senate Bill 762 specifically authorizes Hercules to seek an additional transactions and use tax of as much as a full percentage point even if doing so pushes the city past California's normal combined district tax ceiling. The bill would still require a council ordinance and voter approval, but a city does not go to Sacramento for special legislation unless it intends to use it.

Voters may have the misimpression that sales tax revenues sit frozen when the rate stays unchanged. But sales taxes are percentages of purchases measured in current dollars, so when prices rise, population grows and economic activity expands, collections rise automatically.

California's General Fund sales tax rate has been 3.9375% since July 1, 2011. Over that period, General Fund sales and use tax collections rose from roughly $19.24 billion in fiscal year 2011-12 to $35.01 billion in 2024-25, an increase of nearly 82%, or 4.7% compounded annually, with no change in the applicable rate. The California Department of Tax and Fee Administration documents both the rate and the annual collections in its long-running Table 18. Over the same years, national inflation combined with California population growth amounted to roughly 3% annually, which is close to the benchmark used in Colorado's Taxpayer's Bill of Rights, where state revenues may generally grow with inflation and population unless voters approve more. California's General Fund sales tax collections grew about 1.7 percentage points faster each year than that benchmark. The underlying price and population data come from the federal Bureau of Labor Statistics and the California Department of Finance, respectively.

So, governments do not need rate increases merely to keep pace with inflation and population.

When we make this point, local officials and tax advocates usually cite Proposition 13. They argue that its 1% basic rate and its 2% limit on annual assessment increases have starved local government and made sales taxes a necessary workaround. But that argument confuses the treatment of an individual parcel with the performance of the entire tax base. Properties are reassessed when they change hands, new construction is added to the tax roll, and assessments on everything else generally rise by as much as 2% each year.

Contra Costa's own numbers show what that produces. The county's net assessment roll grew from $192.2 billion in 2017-18 to $300.8 billion in 2026-27, an increase of 56.5% and a compound annual growth rate of 5.1%. During roughly the same period, Bay Area inflation plus Contra Costa population growth averaged about 3.5% annually, so the assessed value base grew approximately 1.6 percentage points faster each year than an inflation and population benchmark. Because the basic property tax levy is generally 1% of assessed value, that roll growth is a strong indicator of expanding property tax capacity, even though actual receipts differ somewhat because of appeals, exemptions, supplemental assessments and collection timing.

Neither major revenue source is standing still. Sales tax collections rise with taxable spending, prices and population. Property tax revenues benefit from assessment increases, real estate turnover and new development. Both have grown faster than inflation and population over the periods we examined. Cities, counties, transit agencies and special districts should stop treating each new spending demand as an occasion for another tax increase.

Their existing revenue envelope is already expanding. The responsible answer is to set priorities, control compensation and operating costs, eliminate lower value programs, and learn to live within the growing revenues taxpayers already provide.

Upcoming Events

CoCoTax Lunch, July 24: County Budget Overview with County Administrator Monica Nino
Friday, July 24, 2026 | 11:45am – 1:15pm PDT | Denny's, Concord

As the County's 2026-27 fiscal year gets underway, Monica will provide an overview of the budget. We will also discuss state ballot measures and possibly some of the local measures as well.

Although we will not hold a lunch in August, we will have a members Zoom call on Tuesday, August 11th at noon to discuss CoCoTax recommendations for measures on the November ballot not covered at our regular July 24 lunch meeting. Zoom link will provided to members ahead of the call.

CoCoTax Lunch, September 25: Proposition 43 with Scott Kaufmann, Howard Jarvis Taxpayers Association
Friday, September 25, 2026 | 11:45am – 1:15pm PDT | Denny's, 1313 Willow Pass Road, Concord

Scott Kaufmann, Legislative Director of the Howard Jarvis Taxpayers Association, will discuss Proposition 43, which would raise the threshold for citizen-initiated special tax measures from a simple majority to two thirds.

CoCoTax Lunch, October 23: November Tax Ballot Measures with Rob Gutierrez, CalTax
Friday, October 23, 2026 | 11:45am – 1:15pm PDT | Denny's, 1313 Willow Pass Road, Concord

Rob Gutierrez, President and CEO of the California Taxpayers Association, will analyze Proposition 40, the one-time 5% tax on billionaires, and Proposition 3, which would make the state's top personal income tax rates permanent.

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