BILL ANALYSIS
ACA 6
Page 1
Date of Hearing: July 1, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
ACA 6 (Calderon) - As Amended: April 20, 2009
Policy Committee: Revenue and
Taxation Vote: 6-3
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This ACA limits the operative period of all new and extended tax
expenditures. Specifically, the ACA:
1)Provides that a new tax expenditure, or extension of the
operation of an existing tax expenditure, that is enacted by a
legislative measure shall be operative for a period of seven
years or for a shorter period specified in that measure.
2)Defines a "tax expenditure" as a credit, deduction, exclusion,
exemption, or any other tax benefit provided by statute.
FISCAL EFFECT
1)Moderate GF costs of about $220,000 in 2009-10 to the
Secretary of State to place this measure in the statewide
election voter pamphlet. This estimate assumes about four
pages at $55,000 per page.
2)Potential increase in revenues over time if tax expenditures
that would otherwise be enacted permanently are limited to
seven years. Actual impact would depend on decisions made by
future legislatures and governors regarding tax policy.
COMMENTS
1)Background . Tax expenditures consist of credits, deductions,
exclusions, exemptions or other tax benefits provided for in
state law. Currently, the Department of Finance is required to
report to the Legislature by September 15 of each year on each
tax expenditure exceeding $5 million annually. The report is
ACA 6
Page 2
required to include: the statutory authority for the tax
expenditure; information on the legislative intent behind its
implementation; its sunset date, if any; a brief description
of its beneficiaries; an estimate of its fiscal effect, the
number of taxpayers affected, and a listing of comparable
federal tax benefits.
2)Purpose . The bill is intended to provide for increased
scrutiny of tax expenditures. The author asserts that, while
tax expenditures can be a useful tool in stimulating economic
growth and achieving important public policy goals, the state
should not allow such expenditures to accumulate without a
mechanism for periodic legislative review. According to the
sponsor (the state controller) , the measure is intended to
address a major shortcoming of our budgeting process in that
tax expenditures are enacted without a specific date by which
their efficacy will be evaluated. The sponsor further asserts
that, according to the Department of Finance, there are now
more than $50 billion in state and local tax expenditures in
law, and "in light of the State's dim long-term fiscal
outlook, it is imperative that tax expenditures that have not
met their objective and are no longer justified be
eliminated."
3)Opponents (the California Chamber of Commerce and the
California Taxpayers' Association) assert that mandatory
sunsets on credits, deductions, and other tax expenditures
create uncertainty in the tax code and make it difficult for
businesses to undertake long-term planning.
4)Previous legislation . AB 831 (Parra), introduced in the
2007-08 Legislative Session, would have required any
legislation creating a new tax expenditure, or extending the
operation of an existing tax expenditure, to include a sunset
provision. AB 1933 (Coto), introduced in the 2005-06
Legislative Session, would have required any legislative
measure creating a new tax expenditure, or extending the
operation of an existing tax expenditure, to include
legislative findings regarding the purpose of the tax
expenditure, an estimate of the attributable revenue losses, a
specific methodology for measuring the anticipated benefits,
and a sunset date no later than five years in the future.
Both measures failed to pass out of the Senate Committee on
Revenue and Taxation.
ACA 6
Page 3
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081