BILL ANALYSIS Ó
-----------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 366|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
-----------------------------------------------------------------
THIRD READING
Bill No: AB 366
Author: Bonta (D)
Amended: 6/14/16 in Senate
Vote: 21
PRIOR VOTES NOT RELEVANT
SENATE GOVERNANCE & FIN. COMMITTEE: 5-2, 6/29/16
AYES: Hertzberg, Beall, Hernandez, Lara, Pavley
NOES: Nguyen, Moorlach
SUBJECT: Transactions and use taxes: City of Alameda
SOURCE: Author
DIGEST: This bill allows the City of Alameda to adopt an
ordinance proposing the imposition of a transactions and use tax
that exceeds the 2% statutory limitation.
ANALYSIS:
Existing law:
1)Imposes a sales and use tax (SUT) on the sale, storage, or use
of tangible personal property unless exempted by state law.
2)Allows cities and counties to increase the SUT rate up to 2%
AB 366
Page 2
as a transactions and use tax (TUT) for either specific or
general purposes with voter approval as required by the
California Constitution.
3)Requires the local tax to be imposed in increments of 0.125%.
This bill:
1)Allows the City of Alameda to adopt an ordinance proposing the
imposition of a TUT for the support of citywide programs and
services, at a rate of no more than 0.50% that, in combination
with other specified taxes, exceeds the 2% statutory
limitation.
2)Requires the City of Alameda to meet the following criteria
before imposing the tax:
a) The ordinance proposing the TUT must be adopted in
accordance with the applicable voting approval requirement;
b) The ordinance must be submitted to the electorate and be
approved by the voters after January 1, 2017 and before
January 1, 2025; and,
c) The proposed tax must conform to current law.
3)Finds and declares that a special law is necessary because of
the unique fiscal pressures experienced in the City Alameda.
Comments
1)Transactions and Use Tax Law. Cities and counties are
authorized to impose additional TUT to the state's SUT rate,
subject to voter approval as required by the California
AB 366
Page 3
Constitution, which provides that general purpose taxes
require majority voter approval and taxes restricted for a
specified use require two-thirds voter approval. According
BOE, as of April 1, 2016, 4 of 48 county-imposed taxes are
general taxes and 44 are special taxes, with 30 dedicated for
transportation purposes. There are 157 city-imposed taxes:
127 general purpose and 30 special purpose taxes.
Generally, TUT may be imposed in 0.125% increments, up to a
total of 2% within the county. However, the Legislature has
granted several exemptions to the 2% cap, subject to voter
approval, as local jurisdictions where both the county and
cities within the county impose TUT may otherwise easily
exceed the cap. These jurisdictions include the City of El
Cerrito, County of Alameda, County of Contra Costa, County of
San Mateo, Transportation Agency for Monterey County, and the
Los Angeles Metropolitan Transportation Authority (MTA).
2)Existing cap. SB 566 (Scott, Chapter 709, Statutes of 2003)
imposed the uniform 2% cap for both cities and counties, in
response to at least five bills a year seeking to impose the
tax. The cap set an upper limit on the local rate, as
California's sales and use tax rate is very high relative to
other states. Last year, AB 464 (Mullin and Gordon) attempted
to raise the cap to 3%, however, Governor Brown vetoed the
bill, stating:
"This bill would raise, on a blanket basis, the limit on
local transactions and use tax for all counties and cities
from two percent to three percent. Although I have approved
raising the limit for individual counties, I am reluctant
to approve this measure in view of all the taxes being
discussed and proposed for the 2016 ballot."
FISCAL EFFECT: Appropriation: No Fiscal
Com.:NoLocal: No
SUPPORT: (Verified7/6/16)
AB 366
Page 4
Alameda Chamber of Commerce
Alameda Firefighters Association
Alameda Police Officers Association
Alameda Unified School District
City of Alameda
OPPOSITION: (Verified7/6/16)
California Taxpayers Association
Howard Jarvis Taxpayers Association
ARGUMENTS IN SUPPORT: According to the author, "The City of
Alameda is seeking the ability to submit to the voters in a
future election an increase in the sales and use tax rate up to
an additional .5%. This could potentially take Alameda's tax
rate to 10%. The ability for Alameda to go to the voters with
this request is necessary because the city faces unique fiscal
pressures that warrant a tax increase. Alameda is an island
city with specific needs related to its infrastructure, public
services, and proximity to the San Francisco Bay. In order to
ensure that there is adequate time for the measure to be ready
for the November 2018 election, there are many significant
milestones that need to be met to give the city a chance at
successfully passing the measure. "
ARGUMENTS IN OPPOSITION: Opponents argue that this bill sets
a negative taxation precedent because it would create another
exemption from the existing 2% cap for local sales taxes.
Radically different tax rates across different counties can make
it more difficult for businesses to remain compliant with the
law. Also, a sales tax increase is highly regressive, and
therefore it seems unwise to authorize additional tax increases.
Prepared by:Myriam Bouaziz / GOV. & F. / (916) 651-4119
7/29/16 10:48:58
AB 366
Page 5
**** END ****