Sanchez proposes to cut sales taxes

Assemblymember Kate Sanchez, who represents parts of both Orange County and the Inland Empire, has introduced legislation to reduce the state’s sales tax by 1% for one year.

The bill, Assembly Bill 1724, obviously has no chance of getting anywhere in the Democratic supermajority California Legislature. The bill is effectively dead on arrival.

Sanchez argues the proposal is justified and necessary to combat inflation.

“Rising inflation and higher prices are affecting us all,” she said. “AB 1724 will offer immediate financial relief for everyone. The 1% reduction in sales tax will allow hardworking Californians to keep more money in their pockets and let them decide how they would like to spend it.”

Although this editorial board certainly supports tax cuts, Sanchez likely errs in arguing a 1% sales tax holiday would meaningfully ease the pain of inflation.

For one, most of the basic goods people buy to get by, like food, housing and medications, are already free from the sales tax.

The benefits of a sales tax cut, then, apply to a broad category of consumer goods, like clothing and computers. And on that front, there’s also good reason to believe that a sales tax holiday actually may be, in fact, somewhat inflationary.

As explained by the nonpartisan Tax Foundation, “Currently, inflation is high because a lot of dollars are chasing after a limited number of goods. If sales tax holidays really did increase demand, as proponents say they do, they would be mildly inflationary, contributing to the problem instead of the solution.”

That’s because sales tax holidays may simply induce consumers to buy more things that they otherwise might have postponed purchasing.

This would be better justified in noninflationary times.

Although the spirit of Sanchez’s proposal is one this editorial board generally favors — taxpayers should be able to keep more of their own money — if Sanchez is concerned about rising inflation and higher prices, her focus should be on targeting the high cost of living and the high cost to do business.

And, of course, opposing policies likely to aggravate our inflation problem.

Sanchez should look for solutions that she might actually be able to get Democratic support for.