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Taxable retail sales, a measure of consumer spending, plunged 17.4% the past four years, the greatest decrease since the Great Depression, says Kelly Cunningham, economist for the National University System Institute for Policy Research. However, consumer spending in the rest of California plummeted 19% and San Diego did better than other Southern California cities, says Cunningham, who used data from the California State Board of Equalization for the calculation of dismal 2006-2009 sales.

Taxable sales fell 0.7% in 2007 (the recession began in that year's fourth quarter), 4.5% in 2008 and a staggering 12.8% in 2009, when sales fell to $39.5 billion, the first time since 2002 they had been lower than $40 billion in the county. Get this: adjusted for inflation (the proper economic method of measurement), sales fell to 1997 levels, when the county had 560,000 or 1 in 5 fewer residents.

Adjusted for inflation, sales per capita have fallen by 25.6% since the 2005 peak. Inflation-adjusted per capita retail sales in 2009 were the lowest since -- hold your hat -- 1967. Since 2006, the largest decline was in National City, 30.3%. Escondido, Lemon Grove and El Cajon had the next biggest drops, between 26% and 28%.

Based on preliminary Board of Equalization data for the first three quarters of 2010, California taxable sales should rise 1% this year while San Diego goes up 2.4%, well above other Southern California counties. However, it is likely to take more than a decade for inflation-adjusted retail sales in San Diego to get back to previous levels, says Cunningham. Startlingly, he reports that 1 of every 7 San Diego businesses closed in the last four years.

"The imposition of higher taxes on sales transactions by businesses still struggling to recover is worth noting," says Cunningham. Last year, the State of California raised the sales tax rate from 7.25% to 8.25%. "The impact of California adding a 1% higher sales tax rate in 2009 may have broadened the record drop of taxable sales throughout the state," says Cunningham. Proposition D on the November ballot would raise the San Diego sales tax rate from 8.75% to 9.25%. Economists have found varying effects of rising sales tax increases around the country. There is "a need to be more attentively focused on probable changes in buyer behavior due to increasing the absolute rate of taxation and relative differences of sales taxes in the local region," says Cunningham.

Until consumer spending picks up, "businesses are not likely to hire more workers. Until employment picks up, consumers are not likely to resume spending," says Cunningham.

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Comments

a2zresource Oct. 22, 2010 @ 7:06 p.m.

From this blog post, it is possible that if passed, Proposition D may not only fail to being in additional revenues from further depressed sales but may also delay hiring in the retail sector even further.

Empty stores, empty dreams.

The Salvation Army may become my preferred shopping outlet. Hopefully, they have lay-a-way...

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Burwell Oct. 22, 2010 @ 7:14 p.m.

Many economists are predicting that Bernanke will artifically boost the inflation rate in order to jump start consumer spending. He has no other tools left. Bernanke believes that high inflation rates spur consumer spending as consumers rush to buy products in order to beat expected future price increases. Of course he will wipe out the elderly and savers if he boosts the inflation rate. Bernanke is a lunatic.

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David Dodd Oct. 22, 2010 @ 7:17 p.m.

Raising the inflation rate has other purposes. Agree with Burwell, that it won't increase consumer spending, but it will encourage the FED to raise interest rates. If the banks can make money loaning at higher rates, then this could kick-start small businesses and the U.S. could recognize real growth. Let the lunatic raise inflation, he could accidentally start a real economic recovery.

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Don Bauder Oct. 22, 2010 @ 9:40 p.m.

Response to post #1: I am sure these data will be used against Prop. D as, in my opinion, they should. The sales tax is regressive, hitting the indigent and middle class the hardest. The fact that National City and El Cajon have such large drops may also be used as an anti-Prop. D argument. Best, Don Bauder

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Don Bauder Oct. 22, 2010 @ 9:44 p.m.

Response to post #2: Oh yes, there is no question that Bernanke is trying to bring inflation up. Most economists say inflation is bad, but deflation is worse -- and much harder to tame. And it is correct that inflation does stimulate sales: people rush to buy before prices go up. Remember the 1970s? It's the reverse in deflation: people wait to buy, expecting prices to go down. Best, Don Bauder

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Don Bauder Oct. 22, 2010 @ 9:47 p.m.

Response to post #3: The problem is that there has been so much money printed that it will be next to impossible to keep inflation from running away on the upside. Globally. Best, Don Bauder

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SurfPuppy619 Oct. 23, 2010 @ 8:50 a.m.

The Salvation Army may become my preferred shopping outlet. Hopefully, they have lay-a-way...

Almost all my sales tax items are purchased on Ebay today, I always get a better deal, even after shipping is added in on new items, and if I can find an almost new item it is evcen better, like the Osterizer blender I bought (at 95% new) last week on ebay= $15+$10 S/H=$25total....... Walmart= $59.99+ $6 sales tax= $66....60% less than buying new in San Diego County.

The only items I am buying local are food items,and those are not taxed for the most part.....the sales tax is too high right now, and to keep increasing it by one half to one fill point every 3 years is going to depress sales to the point that lcal sales will be in the minority and online sales will eb the majority.

BTW-if the ebay seller is in CA they are supposed to charge sales tax-some do some don't, the ones that do I simply skip, and buy from someone else out of state.

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SurfPuppy619 Oct. 23, 2010 @ 8:52 a.m.

The problem is that there has been so much money printed that it will be next to impossible to keep inflation from running away on the upside

Of course the upside to our currency devaluation is that we will not longer have to leave the home to purchase toilet paper, we will be able to use paper currency because that will be worth less than the TP.

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SurfPuppy619 Oct. 23, 2010 @ 8:59 a.m.

Of course he will wipe out the elderly and savers if he boosts the inflation rate. Bernanke is a lunatic.

Big Ben a lunatic??? I thought Big Ben was a Wall Street Guru, from the Academic side?

Did Big Ben not say in "The Great Moderation";

"we are in a new era, where economic volatility has been permanently eliminated"..................LOL-classic!!!

But wait folks (as they say in late night infomercials) there is more.

This video should make people think twice about listening to anything that Chairmen of the Fed Ben Bernanke says. It's a compilation of statements he's made from 2005-2007 that will have you 100% certain America is doomed if we continue to value what this moron says, PLEASE listen very carefully @ 1:15;

. http://www.youtube.com/watch?v=HQ79Pt... .

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Don Bauder Oct. 23, 2010 @ 9:12 a.m.

Response to post #7: Online purchases create a problem in taxation. This will be one helluva donnybrook as the nation faces this problem. However, we have so many other problems that it may not surface for awhile. Best, Don Bauder

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Don Bauder Oct. 23, 2010 @ 9:15 a.m.

Response to post #8: Damn! I have 300 shares of Procter & Gamble, maker of toilet paper. Never even thought of that angle. I also have 200 of Kimberly Clark, maker of Kleenex. It could be negatively affected by the same phenomenon. Best, Don Bauder

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Don Bauder Oct. 23, 2010 @ 9:17 a.m.

Response to post #9: He said the subprime problem was under control. Best, Don Bauder

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