BILL ANALYSIS Ó AB 1561 Page 1 Date of Hearing: May 18, 2016 ASSEMBLY COMMITTEE ON APPROPRIATIONS Lorena Gonzalez, Chair AB 1561 (Cristina Garcia) - As Amended April 28, 2016 ----------------------------------------------------------------- |Policy | Revenue and Taxation |Vote:| 9 - 0 | |Committee: | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: NoReimbursable: No SUMMARY: 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 Page 2 COMMENTS: 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 Page 3 Analysis Prepared by:Luke Reidenbach / APPR. / (916) 319-2081