San Diego Budget Deficit 2025: What Local Taxpayers Need to Know

Koen Van Duyse
May 4
3 min read

Updated: May 13

San Diego County is facing a projected budget shortfall of $138.5 million for the upcoming fiscal year (2025–2026). This figure is expected to increase to over $321 million within the next five years. If you live in or own a business in North County San Diego, it's crucial to pay attention. Local officials are deliberating on new tax measures to address this financial gap.

This blog post details the current situation, potential tax increases, and what they could mean for you.

Causes of the San Diego Budget Deficit 2025

Several factors are contributing to San Diego's looming budget crisis:

Higher costs for essential services such as public safety, housing, and healthcare.
Reduced federal and state aid that helped sustain budgets during the pandemic.
Inflation and rising operational costs, particularly in urban development and infrastructure maintenance.

This mounting pressure at both the city and county levels compels local governments to explore new revenue sources. It’s essential for citizens to understand these underlying causes.

What Tax Increases Are Being Considered?

To address the budget shortfall, various tax measures are being discussed:

Sales tax hikes: A proposed increase at the county or city level could generate more revenue for the general fund. Although this option is politically challenging, it serves as a direct means to raise funds.
Real estate transfer taxes: Increasing the tax applied when properties change hands, particularly targeting high-value or commercial properties.
Special parcel taxes or service fees: These may fund specific projects, such as fire protection or essential infrastructure.

If these measures advance, they may appear on local ballots during the 2025 or 2026 elections.

What This Means for North County Residents

For residents in areas like Encinitas, Carlsbad, Vista, or San Marcos, the budget gap's impact could be significant:

Homeowners and sellers could face increased real estate transfer taxes, especially for properties over a certain value.
Shoppers might notice a rise in everyday expenses if a sales tax increase is implemented.
Local businesses may pass on increased operational costs to customers, particularly in the retail and service sectors.

These changes, while gradual, will be especially noticeable for families already grappling with affordability issues.

Recent Local Tax Moves to Watch

It is also helpful to examine recent trends in local taxation:

In 2024, Encinitas voters rejected Measure K, aimed at a 1% sales tax increase.
Conversely, cities like Escondido, Oceanside, and San Marcos approved similar tax hikes to fund public safety and infrastructure.

This mixture of acceptance and rejection indicates that voters might support new taxes when the purpose is clear and the impacts are perceived as fair.

What You Can Do Now

Stay Informed

Keep an eye on county budget discussions and city council meetings.
Stay updated with local news outlets like Voice of San Diego and Axios San Diego.

Plan Ahead

If you're considering buying or selling property in 2025–2026, think about the possible new transfer taxes.
Monitor how potential tax changes could impact your household or small business finances.

Make Your Voice Heard

Attend town halls or public forums to express your opinions.
Reach out to your county supervisor or city council representative.
Participate in upcoming local elections—your vote can influence these policies.

Understanding the Bigger Picture

The budget deficit in San Diego will have real consequences for all residents. Increased taxes, combined with potential reductions in services, will be felt across San Diego County.

If you want clarity on how these changes may impact your records, deductions, or tax reporting as a small business or homeowner, Cardiff Tax Pros is here to assist. We specialize in organizing financial records, categorizing expenses, and preparing taxes accurately and affordably.

Get in touch to see how we can take this off your plate.

Sources: Axios San Diego, Voice of San Diego, County of San Diego FY25-26 Budget Planning Documents