BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 464|
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THIRD READING
Bill No: AB 464
Author: Mullin (D) and Gordon (D), et al.
Amended: 6/17/15 in Senate
Vote: 21
SENATE GOVERNANCE & FIN. COMMITTEE: 4-2, 6/10/15
AYES: Hertzberg, Beall, Hernandez, Pavley
NOES: Nguyen, Moorlach
NO VOTE RECORDED: Lara
ASSEMBLY FLOOR: 45-31, 5/14/15 - See last page for vote
SUBJECT: Transactions and use taxes: maximum combined rate
SOURCE: Author
DIGEST: This bill increases the countywide transactions and use
tax combined cap from 2% to 3%.
ANALYSIS:
Existing law:
1)Authorizes cities and counties to impose local transactions
and use taxes.
2)Provides that the maximum combined rate of all transactions
and use taxes that may be levied by authorized entities within
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a county is 2%
3)Provides that counties and cities may impose a transactions
and use tax for general purposes and special purposes at a
rate of 0.125%, or multiple thereof, if the ordinance imposing
the tax is approved by the required percentage of voters in
the city or county.
4)Exempts from the 2% cap the counties of Alameda, Contra Costa,
and Los Angeles.
This bill:
1)Increases the maximum combined rate of all transactions and
use taxes (district taxes) that may be levied by authorized
entities within a county from 2% to 3%.
2)Becomes effective January 1, 2016.
3)Applies the new 3% cap to the exemptions in the counties of
Alameda, Contra Costa, and Los Angeles.
Background
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), which allowed cities and counties to impose
additional sales and use taxes, called transactions and use
taxes up to a 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.
In rare cases, the Legislature allows local agencies to exceed
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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. 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%.
In 2003, SB 314 (Murray, Chapter 785) enacted provisions that
authorized the Los Angeles County Metropolitan Transportation
Authority (MTA) to impose a 0.5% transaction 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 MTA's
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, 2015), pending in the Senate Floor,
and AB 338 (Hernández, 2015), pending in the Senate
Transportation and Housing Committee, both authorize MTA to
impose an additional countywide 0.5% transactions and use tax.
At the present time, the Counties of Alameda, Contra Costa, Los
Angeles, and San Mateo have reached the 2% limit. The Counties
of Marin, San Diego, and Sonoma Counties are near the 2% limit
and the Cities of Albany, Hayward, San Leandro, Union City, La
Miranda, Pico Riviera, and South Gate are above the 2% limit.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:NoLocal: No
SUPPORT: (Verified6/17/15)
Alameda County Transportation Commission
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American Federation of State, County, and Municipal Employees
California State Association of Counties
California State Council of Laborers
California Tax Reform Association
California Transit Association
City/County Association of Governments of San Mateo County
Marin County Board of Supervisors
Metropolitan Transportation Commission
MuniServices
San Mateo County Transportation Authority
Santa Clara Valley Transportation Authority
Self Help Counties Coalition
Service Employees International Union
Transportation Authority of Marin
OPPOSITION: (Verified6/17/15)
Air Logistics Corporation
Alliance of Contra Costa Taxpayers
California Manufacturers and Technology Association
California Tank Lines, Inc.
California Taxpayers Association
Chemical Transfer Co.
Family Business Association
Kern County Taxpayers Association
Monterey County Farm Bureau
National Federation of Independent Business
Orange County Business Council
Orange County Taxpayers Association
San Diego Tax Fighters
Solano County Taxpayers Association
Superior Tank Wash Inc.
West Coast Leasing, LLC
West Coast Lumber & Building Material Association
ARGUMENTS IN SUPPORT: The proponents of this bill state that
in many communities "throughout the state, local agencies are
considering options for financing improvements in
infrastructure, parks, public safety, and other local programs."
However, many agencies "are precluded from considering the
option of an additional transactions and use tax due to the 2
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percent cap on the combined rate." The proponents note that the
Legislature previously has considered "a number of measures that
offered limited exceptions to the two-percent cap in certain
California communities" and argue that perhaps "it is the
appropriate time to consider a broad increase in the
transactions and use tax cap." The proponents also assert that
"the existing two-percent cap on local sales tax severely limits
local government's ability" to fund new and existing
transportation and other vital local services since "many
jurisdictions are already at or are near that threshold."
Increasing the cap from 2% to 3% "would provide local
governments throughout the state with more flexibility to use
sales tax measures as a strategy to support a growing scope of
local needs." Finally, the proponents note that this bill
"gives local jurisdictions the freedom to seek voter approval
for a local tax increase with local accountability."
ARGUMENTS IN OPPOSITION: The opponents state that
"California already has the highest sales and use tax rate in
the country, with a combined minimum state and local sales tax
rate of 7.5 percent." Moreover, "local governments may impose
additional transactions (sales) and use taxes, known as district
taxes, generally capped at 2%." The opponents argue that this
bill increases the cost of conducting business in California,
impose a regressive tax on disadvantaged communities.
ASSEMBLY FLOOR: 45-31, 5/14/15
AYES: Bloom, Bonilla, Bonta, Brown, Burke, Calderon, Campos,
Chau, Chiu, Chu, Cooley, Cooper, Dodd, Eggman, Frazier,
Cristina Garcia, Eduardo Garcia, Gipson, Gomez, Gonzalez,
Gordon, Gray, Roger Hernández, Holden, Jones-Sawyer, Levine,
Lopez, Low, McCarty, Medina, Mullin, Nazarian, O'Donnell,
Quirk, Rendon, Ridley-Thomas, Rodriguez, Santiago, Mark Stone,
Thurmond, Ting, Weber, Williams, Wood, Atkins
NOES: Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang,
Chávez, Dahle, Beth Gaines, Gallagher, Gatto, Grove, Hadley,
Harper, Irwin, Jones, Kim, Lackey, Linder, Maienschein,
Mathis, Mayes, Melendez, Obernolte, Olsen, Patterson, Salas,
Steinorth, Wagner, Waldron, Wilk
NO VOTE RECORDED: Alejo, Dababneh, Daly, Perea
Prepared by:Myriam Bouaziz / GOV. & F. / (916) 651-4119
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6/17/15 10:52:06
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