BILL ANALYSIS                                                                                                                                                                                                    

                                                                    AB 1561

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          Date of Hearing:   May 18, 2016


                               Lorena Gonzalez, Chair

          1561 (Cristina Garcia) - As Amended April 28, 2016

          |Policy       | Revenue and Taxation          |Vote:| 9 - 0       |
          |Committee:   |                               |     |             |
          |             |                               |     |             |
          |             |                               |     |             |

          Urgency:  No  State Mandated Local Program:  NoReimbursable:  No


          This bill establishes a sales and use tax exemption for tampons,  
          sanitary napkins, menstrual cups, and menstrual sponges. The  
          bill sunsets the exemption on January 1, 2027. 

          FISCAL EFFECT:

          Estimated annual state and local revenue loss of $20 million,  
          including $9.5 million GF. 


                                                                    AB 1561

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          1)Purpose and background.  According to the author, this bill  
            will end an unfair tax that disproportionately harms  
            low-income women. The author notes that California women pay  
            over $20 million annually for taxing tampons and sanitary  
            napkins, which are essential health items for women. Exempting  
            these products from the sales and use tax, like other health  
            items such as prescription medication or walkers, will make  
            the tax code more equitable and help low-income women afford  
            these necessities. 

          2)Sales tax exemptions are generally not a cost-effective tool.  
            The sales and use tax is inherently regressive. Those with the  
            lowest incomes pay the highest percentage of their income in  
            sales and use tax. To balance the tax's regressivity, various  
            exemptions are built in to provide relief for certain  
            necessities, such as food.  Allowing an additional exemption  
            for tampons will undoubtedly help low-income women, but it  
            will also provide similar tax relief to higher-income  
            taxpayers who arguably do not need it. A more targeted  
            approach, such as subsidies directed at low-income women,  
            could produce the same benefit for that population but at  
            lower cost to the state.  

          3)Opposition and impact on counties. The California State  
            Association of Counties (CSAC) opposes this bill because it  
            exempts the full sales and use tax, and not just the state  
            portion. As a result, this bill will have an impact on  
            revenues that are reserved for local governments. 

            A partial exemption is one solution that would minimize the  
            revenue impact on local governments. However, partial  
            exemptions, while cheaper for local governments, result in an  
            even lower tax cut for women and would be more difficult for  
            the Board of Equalization (BOE) to administer.


                                                                    AB 1561

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          Analysis Prepared by:Luke Reidenbach / APPR. / (916)