Sunday, July 15, 2012

Why isn't my Starbucks being taxed?

I hardly ever post on this old political blog of mine, but when I do, I try to mix in an even amount of Oklahoma posts with national political posts.  This ratio is probably going to change though.  I now live in California. 

California politicians seem to be completely the opposite of Oklahoma politicians.  I mean, as far as I know they still haven't even discussed the issue of fetuses in our food, and the perpetrators of the genocidal slaying of California's innocent zygote people remain at-large.  Also of note: Californian legislators seem to have no problems with spending money they don't have, as demonstrated by the $8 billion future boondoggle that will be the Central Valley high speed rail project.

Another striking note of difference between Oklahoma and California: California's politicians are putting a tax increase on the November ballot; they are under the impression that a majority of the people of California are willing to raise taxes on themselves.  I don't know if this a realistic assumption or not, but I do know that any effort by an Oklahoma politician to put a tax increase on the ballot would surely be a sign of that politician trying to kill the tax increase.  In 2010 Oklahomans overwhelmingly rejected a ballot measure that would have increased state spending on schools, in part because of the suspicion that taxes would necessarily have to be increased sometime in the future.  If the measure had included these tax increases in the ballot language, the margin of defeat would have increased from 60% to something like 90%, probably. 

But for all the legislative acceptance of higher taxes as a solution to the fiscal problem, there seem to be loopholes that don't make much sense to me.  One of the first things I noticed when moving here was that my Starbucks was cheaper than in Oklahoma.  I soon realized that this was because my grande hot chai tea latte wasn't being taxed for some reason.  For such a progressive state, it made absolutely no sense to me that $4 coffee from Starbucks, far from being a necessity of life, was being treated like grocery store food. 

I searched around online for a reason for this and came across this excellent article and flowchart from the SF Weekly from April of this year.  One of the points of the article is that the tax system for food is highly and arbitrarily convoluted:

A hot sandwich to go would be taxable, while a prepackaged, cold one would not — but a cold sandwich becomes taxable if it has hot gravy poured onto it. Cold foods to go are generally not taxable — but hot foods that have cooled are taxable (meaning a cold sandwich slathered in "hot" gravy that has cooled to room temperature is taxable). Cold, non-carbonated, non-alcoholic beverages to go aren't taxable. Hot beverages to go are, but coffee and tea are specifically exempted from taxation. Soup, however, is taxable. Hot soup that has cooled? Still taxable. But, the BOE specifically informs SF Weekly, cold soups such as gazpacho are exempt.

But the more important point behind all these exemptions is that it is costing the state billions of dollars in tax revenue.  "In the current year, California's Department of Finance estimates revenue losses from exempting food and bottled (non-carbonated) water to be nearly $10 billion."  $10 billion would be about half of the state's predicted costs for the entire high-speed rail plan from San Francisco to Los Angeles - and about twice the state's costs for the recently-approved Central Valley portion of the plan.  It would be 62% of the $16 billion deficit that California is being burdened with this year.

And all for what? So that we can continue to get tax-free Starbucks? So that I can still go to the grocery store and buy frozen pancakes wrapped around Jimmy Dean sausages tax free?  So that all the rich people who shop at Whole Foods can get their food tax free while the poorer clientele who eat at Taco Bell are forced to pay the nation's highest sales tax rate?  I don't think the state has the right incentives here.

I am normally skeptical about sales tax increases since sales taxes are regressive taxes that affect the poor more than the rich, but it doesn't make any sense to me that California is leaving all that potential Starbucks money on the table when they're trying to slash spending and raise every other tax.  I would think that California would be able to increase revenue while lowering the sales tax rate if they got rid of almost all of these food exceptions, maybe only keeping WIC program food tax free.  Instead, the sales tax rate will be going up a quarter percent if voters pass Proposition 30 in November. McDonald's will become more expensive, but Starbucks will remain tax free. 

But hey, at least we Californians can practice Sharia Law and eat all the fetuses we want.