BILL ANALYSIS Ó
AB 464
Page 1
Date of Hearing: April 29, 2015
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Brian Maienschein, Chair
AB 464
(Mullin and Gordon) - As Amended April 6, 2015
SUBJECT: Transactions and use taxes: maximum combined rate.
SUMMARY: Increases the countywide transactions and use tax
combined rate cap from 2%
to 3%, statewide.
FISCAL EFFECT: None
COMMENTS:
1)Bill Summary. This bill increases the countywide transactions
and use tax combined cap from 2% to 3%. Instead of addressing
the needs of each county and city on an individual basis as
the Legislature has done in the past, this bill will uniformly
increase the statutory cap for all counties and provide more
flexibility to local governments to raise revenue. This bill
does not impact voter thresholds for specific or general
purpose transactions and use taxes in existing law, and voters
still have the final say in approving or voting down a local
transactions and use tax measure.
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This bill is sponsored by the San Mateo County Transportation
Authority.
2)Author's Statement. According to the author, "Current law
allows cities and counties to impose transaction and use
taxes, also known as district taxes, at a rate of up to two
percent of total sales. This cap is quickly reached when both
cities and counties impose their own district taxes. It is
particularly problematic for counties because if one city
within a county has reached the cap, then the county is
precluded from raising additional district taxes. Similarly,
cities that have already reached the cap are constrained when
seeking additional funding for programs and services over and
above the cap.
"The two percent cap was implemented more than a decade ago,
in 2003. Since then, several bills have gone through the
Legislature to create individual exceptions to the cap. Most
of these bills were eventually signed into law, begging the
policy question: If raising the cap is good for individual
jurisdictions, then should we consider simply lifting it
statewide? This bill does exactly this, and as a result it
would not only make the policy statewide, but it would reduce
the amount of piecemeal one-off bills going through the
Legislature on the subject, saving state resources.
"Throughout California, districts are reaching the current
cap, and funding for services, including transportation,
education and public safety, is declining. This bill gives
local jurisdictions the freedom to seek voter approval for
district tax increases by raising the cap from two to three
percent. This bill grants local governing bodies, and the
people living within them, the much needed flexibility to
raise additional funds for important programs and services."
3)Transactions and Use Taxes. Existing law authorizes cities
and counties to impose transactions and use taxes in 0.125%
increments in addition to the state's 7.5% sales tax provided
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that the combined rate in the county does not exceed 2%.
Transactions and use taxes are taxes imposed on the total
retail price of any tangible personal property and the use or
storage of such property when sales tax is not paid. These
types of taxes may be levied as general taxes (majority-vote
required), which are unrestricted, or special taxes
(two-thirds vote required), which are restricted for a
specified use. The Transactions and Use Tax law authorizes
the adoption of local add-on rates to the combined state and
local sales tax rate. The law has been amended multiple times
to authorize specific cities, counties, special districts and
county transportation authorities to impose a transactions and
use tax, if voters approve the tax.
Prior to 2003, cities lacked the ability to place transactions
and use taxes before their voters without first obtaining
approval by the Legislature to bring an ordinance before the
city council, and, if approved at the council level, to the
voters. This was remedied by SB 566 (Scott), Chapter 709,
Statutes of 2003. SB 566 also contained provisions to
increase a county's transactions and use tax cap because of
the possibility that certain counties were going to run out of
room under their caps, if cities within those counties
approved transactions and use taxes.
Because of the interaction between city-imposed and
county-imposed transactions and use taxes, the concern that
counties will run into the 2% cap still applies today.
Currently, the Counties of Alameda, Contra Costa, Los Angeles,
and San Mateo have reached the 2% limit, and the Counties of
Marin, San Diego, and Sonoma are near the 2% limit.
According to the Board of Equalization, as of April 1, 2015,
there are 202 local jurisdictions (city, county, and special
purpose entity) imposing a transactions and use tax for
general or specific purposes. Of the 202 jurisdictions, 48
are county-imposed taxes and 154 are city-imposed taxes. Of
the 48 county-imposed taxes, 44 are imposed for special
purposes. Of the 154 city-imposed taxes, 124 are general
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purpose taxes and 30 are special purpose taxes.
4)Exemptions to the 2% Cap. The Legislature has previously
granted exemptions to the
2% statutory cap for transactions and use taxes to support
countywide transportation programs for Los Angeles, Alameda,
and Contra Costa counties.
AB 1086 (Wieckowski), Chapter 327, Statutes of 2011, allowed a
one-time exemption for Alameda County from the 2% transactions
and use tax combined rate cap. AB 210 (Wieckowski), Chapter
194, Statutes of 2013, extended the authority for Alameda
County to adopt an ordinance imposing a transactions and use
tax from January 1, 2014, to December 31, 2020, and allowed
Contra Costa County to adopt an ordinance imposing a
transactions and use tax in the same manner as Alameda County.
SB 314 (Murray), Chapter 785, Statutes of 2003, originally
enacted provisions that authorized the Los Angeles County
Metropolitan Transportation Authority (MTA) to impose a 0.5%
transactions and use tax, not subject to the 2% cap for no
more than six and one-half years, for specific transportation
projects and programs. The authority to put a tax measure on
the ballot was never used. AB 2321 (Feuer), Chapter 302,
Statutes of 2008, modified those provisions to allow MTA to
impose a transactions and use tax for 30 years. SB 767 (De
León), pending in the Senate Appropriations Committee, and AB
338 (Hernández), pending in the Transportation Committee,
would both authorize MTA to impose an additional countywide
0.5% transactions and use tax.
Additionally, AB 1324 (Skinner), Chapter 795, Statutes of
2014, allowed the City of
El Cerrito to adopt an ordinance to impose a transactions and
use tax not to exceed 0.5%
for general purposes that would, in combination with other
taxes, exceed the statutory limit of 2%.
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5)Arguments in Support. Supporters argue that this bill will
eliminate the piecemeal approach to exceeding the 2% cap and
will provide local agencies with another funding option so
they can provide high quality public services to their
residents.
6)Arguments in Opposition. Opposition argues that this bill
increases the cost of doing business and imposes a regressive
tax on disadvantaged communities.
7)Double-Referral. This bill was heard in the Revenue and
Taxation Committee on April 13, 2015, and passed with a 5-3
vote.
REGISTERED SUPPORT / OPPOSITION:
Support
San Mateo County Transportation Authority [SPONSOR]
Alameda County Transportation Commission
American Federation of State, County, and Municipal Employees
California State Association of Counties
California State Council of Laborers
California Tax Reform Association
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California Transit Association
Metropolitan Transportation Commission
Santa Clara Valley Transportation Authority
Self Help Counties Coalition
Service Employees International Union
Opposition
Air Logistics Corporation
California Manufacturers and Technology Association
California Tank Lines, Inc.
California Taxpayers Association
Family Business Association
Kern County Taxpayers Association
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National Federation of Independent Business
Orange County Business Council
Orange County Taxpayers Association
Superior Tank Wash Inc.
West Coast Leasing, LLC
West Coast Lumber & Building Material Association
Analysis Prepared by:Misa Lennox / L. GOV. / (916) 319-3958