BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 2nd Ext. Session
ABX2 10 (Bloom) - Local taxes: authorization: cigarettes and
tobacco products
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|Version: March 3, 2016 |Policy Vote: P.H. & D.S. 9-3 |
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|Urgency: No |Mandate: Yes |
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|Hearing Date: March 8, 2016 |Consultant: Brendan McCarthy |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: AB X2 10 would authorize the board of supervisors of a
county (or city and county) to impose taxes on cigarette and
tobacco distributors. The bill would authorize a county (or city
and county) to enter into an agreement with the Board of
Equalization to collect a locally-authorized tax.
Fiscal
Impact:
Unknown costs to develop tax collection systems and procedures
and to collect local taxes by the Board of Equalization
(reimbursements). The number of counties that would elect to
impose a new tax on tobacco distributors is unknown. In
addition, the bill does not require that counties impose such
a local tax in a uniform manner. Therefore, the specific
requirements of locally-imposed taxes, including the tax
amounts, would likely vary between jurisdictions. Different
tax requirements between jurisdictions would increase startup
costs to the Board. Under the requirements of the bill, all
costs incurred by the Board would be reimbursed by the county
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imposing the new tax.
Unknown costs for the Board of Equalization to allow counties
to access Board records (reimbursements). The bill requires
the Board to allow counties to access Board records regarding
the existing tobacco tax, in order for counties to administer
the locally tax authorized in the bill. (Presumably, counties
would need information on current tobacco tax payers in order
to design their own local tax.) Under the bill, the Board is
authorized to require reimbursement for any costs it incurs in
sharing this information.
Background: Under current law, the state imposes a tax of $0.87 per
package of cigarettes in addition to the existing $1.01 federal
tax on cigarettes. Resulting tobacco tax revenues are allocated
to a variety of programs to support public health, research,
early childhood education, and deposited into the General Fund.
Current law requires the Board of Equalization to assess an
excise tax on non-cigarette tobacco products equal to the tax
levied on cigarettes. State taxes imposed on tobacco products
are collected in lieu of all other state, county, municipal, or
special district taxes. The in-lieu language does not apply to
fees, the Sales and Use Tax, local sales taxes, or transaction
taxes. Current law does not extend the current tobacco tax to
electronic cigarettes.
Proposed Law:
AB X2 10 would authorize the board of supervisors of a county
(or city and county) to impose taxes on cigarettes and tobacco
distributors.
Specific provisions of the bill would:
Authorize a county (or city and county) board of supervisors
to impose a tax on the privilege of distributing cigarettes
and tobacco products in the county (or city and county);
Authorize a board of supervisors to enter into an agreement
with another county (or city and county) to share
administrative costs of a new tax;
Authorize a board of supervisors to contract with the Board of
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Equalization to administer a local tax authorized under the
bill and require the Board to perform those duties pursuant to
the contract;
Require a county to reimburse the Board for any costs incurred
by the Board in administering a local tax;
Require the Board to permit counties to examine Board records
with respect to the existing tobacco tax, for the purposed of
administering a new tax authorized by a county under the bill;
Authorize the Board to require reimbursement for the costs of
providing required information to counties;
Have an operative date of January 1, 2017;
Exempt new local taxes imposed under the bill from the
existing law that makes the existing state tobacco tax in-lieu
of other taxes.
Related
Legislation: SB X2 9 (McGuire) is substantially similar to this
bill, except that bill does not include provisions relating to
Board of Equalization collection of local taxes. That bill is
pending in the Assembly.
Staff
Comments: The bill does not require counties to impose a local
tax on cigarettes and tobacco products in a uniform manner.
Therefore, tax levels and specific collection requirements may
vary between counties. Different standards between counties are
likely to increase Board of Equalization implementation costs.
Also, the existing tobacco tax is collected by tobacco
distributors. It is not clear at this time how the tax will be
imposed if existing tobacco distributors distribute tobacco
taxes across county lines. In some counties, the
newly-authorized tax may have to be collected at the wholesale
or retail level. To the extent that this is the case, the Board
will not be able to use its existing system for collecting taxes
from tobacco distributors to collect the taxes authorized in
this bill.
In theory, raising tobacco taxes will reduce consumption of
tobacco products, particularly amongst young and low-income
smokers. To the extent that higher local tobacco taxes reduce
consumption, long-term health care costs related to tobacco use
could decline in the state. The extent of such an impact would
depend on how many counties impose additional tobacco taxes and
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the levels of those taxes. It is important to note, however,
that when tobacco taxes differ considerably between
jurisdictions, untaxed or low-tax cigarettes are often smuggled
into higher tax jurisdictions. To some extent this is likely
limit the overall reduction in consumption in any given
jurisdiction.
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