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Does sales tax shift change East County consumer economics?

Posted: April 24th, 2015 | Business, Features, News, Top Stories | 1 Comment

By Jeremy Ogul 

The mayor of El Cajon was beaming with pride as he took to the lectern on a recent morning to proclaim the city was returning $8.6 million a year to the citizens of his city.

With the expiration of Proposition O, the city’s 0.5 percent sales tax approved by voters in 2004, El Cajon was the only city in California this year to reduce its overall sales tax rate — from 9 percent to 8.5 percent.

The change in El Cajon means La Mesa now has the second-highest sales tax rate in San Diego County, at 8.75 percent. The only place with a higher sales tax is National City, at 9 percent. Vista matches El Cajon at 8.5 percent, while all other cities and unincorporated areas in San Diego County are set at 8 percent.

Does this put La Mesa at a competitive disadvantage? Well, like most issues, it depends on who you ask.

El Cajon Mayor Bill Wells thinks his city’s lower sales tax rate will encourage people to shop there for cars, clothes and other consumer goods.

El Cajon Mayor Bill Wells speaks at a press conference to tout the recent drop in sales tax. (Photo by Jeremy Ogul)

El Cajon Mayor Bill Wells speaks at a press conference to tout the recent drop in sales tax.
(Photo by Jeremy Ogul)

“More people will come from out of town to buy their cars here,” Wells said.

A point of clarification is in order: When you buy a vehicle, you pay sales tax based on where you live, not where you buy the vehicle. So if you live in La Mesa and buy your car in Escondido, the sales tax you pay will be La Mesa’s rate of 8.75 percent, not Escondido’s rate of 8 percent.

But most people don’t know that.

“It’s difficult because it’s perception,” said Chris George, president of the Valley of Cars Dealers Association in El Cajon. “We lost business because of that.”

La Mesa has a higher rate because voters in 2008 approved Proposition L, which created a 0.75 percent sales tax to support the city’s general fund for the next 20 years. That revenue has become critical to the city’s budget, yielding about $39.4 million between July 2009 and December 2014. Last year, the Prop. L tax revenue made up just over 35 percent of the city’s general fund revenues.

Municipal budgets aside — will you save money by shopping in another city?

Consider a hypothetical family that spends $1,000 on taxable goods each month — meals at restaurants, clothes, toys, nail polish, garden supplies, paper towels, etc. If they did all their shopping in La Mesa, they would pay $87.50 in sales tax. In El Cajon, they would pay $85 in sales tax. In San Diego, they would pay $80 in sales tax.

Over the course of a year, our hypothetical La Mesa family could save $90 by doing all their taxable shopping in San Diego, or save just $30 by shopping only in El Cajon.

But once you factor in the cost of driving to those other tax havens? Pocket change, at best.

—Write to Jeremy Ogul at Jeremy@sdcnn.com.

One Comments

  1. Jennifer says:

    Do you know when the sales tax in El Cajon dropped?

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