BILL ANALYSIS Ó
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Date of Hearing: September 11, 2015
ASSEMBLY COMMITTEE ON FINANCE
Shirley Weber, Chair
ABX2 18
(Bonilla) - As Amended September 10, 2015
SUBJECT: Taxation: distilled spirits: Cocktails for Healthy
Outcomes Act.
SUMMARY: Imposes a $0.05 per drink tax on all spirits-based
cocktails purchased in restaurants, bars, and other venues in
the state to fund developmental disability services and other
health programs. Specifically, this bill:
1)Imposes a surtax of $0.05 for each spirts-based cocktail
purchased by an individual from an on-sale licensee, beginning
January 1, 2017.
2)Requires the State Board of Equalization (BOE) to recalculate
the rate annually, for each calendar year beginning January 1,
2018, in accordance with the percent change in the California
Consumer Price Index. Prohibits the rate from being less than
$0.05 per cocktail.
3)Requires the licensee to collect the surtax as a charge
separate from, and not included in, any other fee, charge, or
other amount paid by the purchaser.
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4)Requires the BOE to administer and collect the surtax imposed
by this bill pursuant to the Fee Collection Procedures Law.
5)Allows the BOE to prescribe, adopt, and enforce regulations
relating to the administration and enforcement of this bill,
including, but not limited to, collections, reporting,
refunds, and appeals.
6)Creates the Healthy California Special Fund (fund) within the
State Treasury, to receive revenues collected by BOE pursuant
to this bill.
7)Specifies that, upon appropriation by the Legislature, all
moneys in the fund will be expended to either:
a) Developmental disability services, and other health
programs; and
b) Reimbursement for expenses incurred by BOE pursuant to
this bill.
EXISTING LAW:
1)Establishes the State Department of Alcoholic Beverage Control
(ABC) and grants it the exclusive authority to administer the
provisions of the Alcoholic Beverage Control Act in accordance
with laws enacted by the Legislature.
2)Contains various provisions regulating the application for,
the issuance of, the suspension of, and the conditions imposed
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upon, alcoholic beverage licenses by ABC.
3)Establishes the BOE to collect sales and excise taxes, among
its other duties.
4)Establishes an entitlement to services for individuals with
developmental disabilities under the Lanterman Developmental
Disabilities Services Act (Lanterman Act).
5)Grants all individuals with developmental disabilities, among
all other rights and responsibilities established for any
individual by the United States Constitution and laws and the
California Constitution and laws, the right to treatment and
habilitation services and supports in the least restrictive
environment.
6)Establishes a system of 21 nonprofit regional centers
throughout the state to identify needs and coordinate services
for eligible individuals with developmental disabilities and
requires the Department of Developmental Services (DDS) to
contract with regional centers to provide case management
services and arrange for or purchase services that meet the
needs of individuals with developmental disabilities, as
defined.
7)Establishes Department of Health Care Services (DHCS) as the
single state agency responsible for administering and
coordinating the state's efforts in alcohol and drug abuse
prevention, treatment, and recovery services.
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FISCAL EFFECT:
BOE Costs. According to BOE, approximately $2 million is
necessary for start-up costs to implement a new surtax program.
The initial costs for this bill would be paid for by a one-time
General Fund loan, to be reimbursed once revenues are generated.
There are approximately 15-20,000 licensees that would need to
register with BOE for the purposes of administering this new
tax. According to BOE, the one-time implementation costs for
this bill would include developing computer programs, developing
forms and publications, creating registration for licensees,
carrying out compliance and audit efforts, developing
regulations, training staff, and answering surtax-related
inquiries from taxpayers and licensees.
This bill would likely result in ongoing annual costs to the BOE
of approximately $1 million for the continued support of this
program. This cost would be funded by revenues generated from
the surtax. The ongoing costs will support the ongoing
maintenance and annual restructuring of this tax.
BOE Revenue. The BOE has estimated that this new tax will
generate $22 million annually. This estimate is based upon data
from the North American Industry Classification System (NAICS)
codes related to food services and drinking places, as well as
2012 U.S. Census data specifically pertaining to specified NAICS
codes. The methodology used for this revenue estimate is based
upon available taxable sales data.
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BACKGROUND:
Under the current Alcoholic Beverage Tax Law, the following
taxes and surcharges are assessed on the sale of beer, wine, and
distilled spirits:
-----------------------------------------------------
| | Tax | Per | Total |
| | | Gallon | |
| | | | |
| | | | |
| | |Surcharge| |
| | | | |
| | | | |
| | | | |
|--------------------------+--------+---------+-------|
|Beer | $0.04 | $0.16 | $0.20 |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
|--------------------------+--------+---------+-------|
|Wine (not more than 14% | $0.01 | $0.19 | $0.20 |
|alcohol) | | | |
| | | | |
|--------------------------+--------+---------+-------|
|Wine (more than 14% | $0.02 | $0.18 | $0.20 |
|alcohol) | | | |
| | | | |
|--------------------------+--------+---------+-------|
|Sparkling wine | $0.30 | $0.00 | $0.30 |
| | | | |
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| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
|--------------------------+--------+---------+-------|
|Hard cider | $0.02 | $0.18 | $0.20 |
| | | | |
| | | | |
|--------------------------+--------+---------+-------|
|Distilled spirits (100 | $2.00 | $1.30 | $3.30 |
|proof) | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
| | | | |
|--------------------------+--------+---------+-------|
|Distilled spirits (100+ | $4.00 | $2.60 | $6.60 |
|proof) | | | |
| | | | |
-----------------------------------------------------
The proceeds from these taxes and surcharges are deposited into
the Alcohol Beverage Control Fund and are withdrawn for use by
the General Fund or used to pay refunds under the Alcoholic
Beverage Tax program.
Alcohol Consumption. According to the Centers for Disease
Control and Prevention (CDC), excessive alcohol use, either in
the form of heavy drinking (drinking 15 or more drinks per week
for men or eight or more drinks per week for women), or binge
drinking (drinking five or more drinks on an occasion for men or
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four or more drinks on an occasion for women), can lead to
increased risk of health problems such as liver disease or
unintentional injuries. Alcohol use contributes to illnesses as
varied as liver cirrhosis, esophageal cancer, pancreatitis, and
epilepsy. It also plays a role in violent crimes such as sexual
assaults, domestic violence, and child abuse, while also causing
serious injuries and traffic fatalities.
According to the CDC's Behavioral Risk Factor Surveillance
System (BRFSS) survey, more than half of the adult U.S.
population drank alcohol in the past 30 days. Approximately 5%
of the total population drank heavily, while 17% of the
population binge drank. The 2010 BRFSS notes that, compared to
other states, Californians report relatively low rates of binge
drinking. CDC states that excessive alcohol consumption cost
the United States $223.5 billion in 2006. This amounts to about
$1.90 per drink, or about $746 per person. The costs due to
excessive drinking largely resulted from losses in workplace
productivity (72% of the total cost), health care expenses
(11%), and other costs due to a combination of criminal justice
expenses, motor vehicle crash costs, and property damage.
Regional Center Rates. Current statute and regulations set
forth rate requirements for regional centers to adhere to when
contracting with vendors to provide services to consumers.
There are different types of rates for services provided in
different settings, many of which are negotiated between
regional centers and vendors and are subject to a cap as a
result of the state's cost-containment efforts over the past
several years. July 1, 2008 marked the original implementation
date for statewide and regional center median rates, with a
requirement that regional centers do not negotiate rates higher
than the lower of the two median rates for services. Each
regional center is required to annually certify to DDS its
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median rate for each negotiated rate service, which DDS verifies
during its biennial fiscal audit of the regional center.
Despite the median rate cap, a regional center can obtain a rate
increase from DDS under a "health and safety exemption" for a
particular consumer if the regional center can demonstrate the
exemption is necessary to maintain his or her health and safety.
Most recently, FYs 2014-15 and 2015-16 Budget trailer bill
provisions allowed for provider rate increases to address new
state minimum wage requirements and sick leave benefits.
Author's Comments. According to the author, this bill will help
provide necessary funding to ensure California's compliance with
the Lanterman Act, which provides people with developmental
disabilities and their families the right to receive necessary
services in their community. Specifically, the funding from
this bill would go towards increasing the purchase of service
and operations rates of the State's Regional Centers. A portion
of the funding would also go towards alcohol abuse prevention
programs and education.
COMMENTS:
ABX2 18 would allow for a $0.05 per drink tax on all
spirit-based cocktails purchased in restaurants and bars
throughout the state; however it does not include purchases of
wine and beer nor does it include all sales of distilled
spirits. This bill would provide net revenues of $21 million in
ongoing funds for developmental services and other health
programs, and would provide a first step for restructuring of
the current rate system.
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REGISTERED SUPPORT / OPPOSITION:
Support
Alcohol Justice
The Arc of California
Association of Regional Center Agencies
California Medical Association
California Respite Association
California Society of Anesthesiologists
California Supported Living Network
Disability Rights California
East Bay Developmental Disabilities Legislative Coalition
Epilepsy California
Futures Explored, Inc.
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John Gioia, Contra Costa County Board of Supervisors
Lutheran Office of Public Policy
National Down Syndrome Society
North Los Angeles County Regional Center
On My Own Independent Living Services
Regional Center of the East Bay
Rehabilitation Services of Northern California
Strategies to Empower People
TASH
United Cerebral Palsy California
Opposition
Beer Institute
California Artisanal Distillers Guild
California Beer and Beverage Distributors
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California Craft Brewers Association
California Hotel and Lodging Association
California Manufacturers and Technology Association
California Restaurant Association
California Travel Association
CalChamber
CalTax
Diageo
The Distilled Spirits Council of the United States
Family Winemakers of California
Howard Jarvis Taxpayers Association
National Federation of Independent Business
Wine Institute
Wine and Spirits Wholesalers of California, Inc.
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Analysis Prepared by:Jazmin Hicks/ FINANCE /916-319-2099