Voters in Santa Cruz County will be asked this November to consider increasing the local sales tax by a half-cent on the dollar, or 0.5%.
Measure E would generate about $27 million a year and expire after five years, according to an analysis by Laura Bowers, the county’s auditor-controller and treasurer-tax collector.
It would apply countywide, including unincorporated areas and incorporated cities.
Collection of the additional tax would start in April 2027 if the measure is approved by a simple majority of voters. It would generate about $6.75 million in the current 2026-27 fiscal year, which runs through June.
The measure was placed on the ballot in August by the Santa Cruz County Board of Supervisors, which declared that the county was in a state of fiscal distress that same day. The board warned of the loss of roughly $200 million a year in federal funding because of spending cuts enacted as part of what became known as the Big Beautiful Bill in 2025.
The cuts come at a time when Santa Cruz County, like many jurisdictions, exhausted its funding from the American Rescue Plan Act of 2021, which provided $350 billion nationwide to state and local governments to recover from the economic impacts of the COVID-19 pandemic. The legislation required the money to be spent by the end of 2026.
Measure E’s backers say it will be sorely needed for a range of services after reductions in healthcare, food assistance, and other federal funding left the county projecting deep deficits for the next several fiscal years.
Opponents argue there would be no guarantee the money would be spent on those priorities because the sales tax increase is being proposed as a general-purpose tax that does not require the specific list of uses and projects and citizens’ oversight panel that a special-purpose tax would require.
Each jurisdiction in the county has previously increased its sales tax — which is also called a transactions and use tax — above the state base rate of 7.25%, including two countywide transportation measures and one to fund library services.
Each city and the unincorporated area of the county, which is governed by the county Board of Supervisors, have also passed their own increase for general fund purposes.
If Measure E is passed, the new rates would range from 9.75% in Capitola to 10% in the unincorporated area, and 10.25% in the cities of Watsonville and Santa Cruz.
The increase in Watsonville was cited by a group of citizen opponents who authored the ballot argument against the measure as an example of how the tax could hit average consumers with what they called a “regressive tax,” which they say would hit lower-income earners and higher-income residents at the same rate, disproportionately impacting people with tighter budgets.
Supporters, including Santa Cruz County Superintendent of Schools Faris Sabbah and Salud Para la Gente Health Clinics Chief Executive Officer Donna Young, urged voters to approve the measure to fund a range of social safety net and basic government services, including food bank assistance, health clinic funding, and homelessness support.