BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON GOVERNANCE AND FINANCE
                         Senator Robert M. Hertzberg, Chair
                                2015 - 2016  Regular 

                              
          
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          |Bill No:  |AB 1561                          |Hearing    |6/22/16  |
          |          |                                 |Date:      |         |
          |----------+---------------------------------+-----------+---------|
          |Author:   |Cristina Garcia                  |Tax Levy:  |Yes      |
          |----------+---------------------------------+-----------+---------|
          |Version:  |6/15/16                          |Fiscal:    |Yes      |
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          |Consultant|Bouaziz                                               |
          |:         |                                                      |
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            Sales and use taxes:  exemption:  sanitary napkins:  tampons:   
                             menstrual cups and sponges



          Establishes a temporary sales and use tax exemption for tampons,  
          sanitary napkins, menstrual cups, and menstrual sponges.  


           Background 

           California law allows various income tax credits, deductions,  
          and sales and use tax exemptions to provide incentives to  
          compensate taxpayers that incur certain expenses, such as child  
          adoption, or to influence behavior, including business practices  
          and decisions, such as research and development credits.  The  
          Legislature typically enacts such tax incentives to encourage  
          taxpayers to do something that but for the tax credit, they  
          would not do.  The Department of Finance is required to annually  
          publish a list of tax expenditures.  Currently, tax expenditures  
          exceed $57 billion dollars.

          State law imposes a sales and use tax (SUT) on the sale,  
          storage, or use of tangible personal property unless exempted by  
          state law.  Cities and Counties may increase the SUT rate up to  
          2% as a transactions and use tax for either specific or general  
          purposes with voter approval as required by the California  
          Constitution.
                     
          The current state SUT is 7.5%, but beginning January 1, 2017,  







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          the state SUT rate on tangible personal property will be 7.25%  
          and imposed as follows:

                   ------------------------------------------------------------- 
                  |       |                    |                                |
                  | Rate  |    Jurisdiction    |       Purpose/Authority        |
                  |       |                    |                                |
                  |-------+--------------------+--------------------------------|
                  |       |                    |                                |
                  |3.9375%|State (General      |State general purposes          |
                  |       |Fund)               |                                |
                  |       |                    |                                |
                  |-------+--------------------+--------------------------------|
                  |       |Local Revenue Fund  |                                |
                  |1.0625%|2011                |Realignment of local public     |
                  |       |                    |safety services                 |
                  |       |                    |                                |
                  |-------+--------------------+--------------------------------|
                  |       |                    |                                |
                  | 0.50% |State (Local        |Local governments to fund       |
                  |       |Revenue Fund)       |health and welfare programs     |
                  |       |                    |                                |
                  |-------+--------------------+--------------------------------|
                  |       |                    |                                |
                  | 0.50% |State (Local Public |Local governments to fund       |
                  |       |Safety Fund)        |public safety services          |
                  |       |                    |                                |
                  |-------+--------------------+--------------------------------|
                  |       |                    |                                |
                  | 1.25% |Local (City/County) |                                |
                  |       |                    |                                |
                  |       |                    |                                |
                  |       |1.00% City and      |City and county general         |
                  |       |County              |operations.                     |
                  |       |                    |                                |
                  |       |0.25% County        |                                |
                  |       |                    |Dedicated to county             |
                  |       |                    |transportation purposes         |
                  |       |                    |                                |
                  |       |                    |                                |
                   ------------------------------------------------------------- 

           Proposed Law









          AB 1561 (Cristina Garcia) 6/15/16                                 
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           Assembly Bill 1561 establishes a temporary sales and use tax  
          exemption for tampons, sanitary napkins, menstrual sponges, and  
          menstrual cups.  As a tax levy, the bill would take effect  
          immediately, and remains in effect until January 1, 2022.

          AB 1561 provides that, notwithstanding existing law, the state  
          shall not reimburse any local agency for SUT revenues lost as a  
          result of this exemption.  


           State Revenue Impact

           According to the Board of Equalization, AB 1561 would result in  
          an annual state revenue loss of                                   
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
                                                                            
           $20 million.


           Comments









          AB 1561 (Cristina Garcia) 6/15/16                                 
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           1.   Purpose of the bill.   According to the author, "AB 1561 is a  
          bipartisan effort to make menstrual products exempt from the  
          sales and use tax at both the state and local level.  California  
          women pay over 20 million dollars annually for taxing tampons  
          and sanitary napkins, which are essential health items for  
          women.  As a state we should not be taxing women for being born  
          women.  The tax is especially unjust for women who are  
          low-income or homeless who struggle to pay for these basic  
          necessities each month for the majority of their adult life.   
          Menstrual products need to be more accessible and eliminating  
          the tax on tampons and sanitary napkins is an important first  
          step in making them more affordable.  California's tax code  
          exempts health items like walkers, medical identification tags,  
          and prescription medication, including Viagra. Tampons and  
          sanitary napkins are not exempt even though women do not have  
          the choice to ignore their periods and are far from being  
          luxuries items.  When these items are labelled as "feminine  
          hygiene" products, it makes people forget that the FDA regulates  
          both products as medical devices.  There is no equivalent health  
          product that is used only by one gender on a monthly basis for  
          40 years of life.  Across the world, countries as well as select  
          states in the US are organizing to repeal the sales tax on  
          feminine hygiene products.  California should continue to be a  
          leader by addressing the gender inequality in our tax code and  
          exempt menstrual products."  

          2.   A new tax expenditure.   Existing law provides various  
          credits, deductions, exclusions, and exemptions for particular  
          taxpayer groups.  In the late 1960s, U.S. Treasury officials  
          began arguing that these features of the tax law should be  
          referred to as "expenditures," since they are generally enacted  
          to accomplish some governmental purpose and there is a  
          determinable cost associated with each (in the form of foregone  
          revenues).  This bill would create a new tax expenditure,  
          costing the general fund $20 million dollars in foregone revenue  
          each year.  The tradeoff for providing new tax expenditure,  
          resulting in revenue losses, is higher taxes or reductions to  
          other services or programs.

          3.   How is tax expenditure different from a direct expenditure?    
          As the Department of Finance notes in its annual Tax Expenditure  
          Report, there are several key differences between tax  
          expenditures and direct expenditures.  First, tax expenditures  
          are reviewed less frequently than direct expenditures once they  








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          are put in place.  This can offer taxpayers greater certainty,  
          but it can also result in tax expenditures remaining a part of  
          the tax code without demonstrating any public benefit.  Second,  
          there is generally no control over the amount of revenue losses  
          associated with any given tax expenditure.  Finally, once  
          enacted, it takes a two-thirds vote to rescind an existing tax  
          expenditure absent a sunset date.  AB 1561 has a sunset date.

          4.   Regressive tax.   The sales tax is considered by most tax  
          experts to be regressive, meaning that the incidence falls more  
          on low-income individuals than high-income individuals.  While  
          this bill would provide important financial relief to low-income  
          women struggling to make ends meet, it would also provide relief  
          to women regardless of income, as women of all incomes purchase  
          tampons, sanitary napkins, menstrual sponges, and menstrual  
          cups. 

          5.  Necessities of life.   Current state provides sales and use  
          exemptions for goods that are considered "necessities of life."   
          The exemption includes most food items, prescription medication,  
          and gas, electricity and water utilities sold to consumers  
          through mains, lines, and pipes.  Tampons, sanitary napkins,  
          menstrual cups, and menstrual sponges are medical necessities  
          for women's health, but are subject to sales and use tax.  The  
          author of the bill argues that other health related necessities  
          of life are exempt from sales and use tax, and as a necessity of  
          life for women, tampons, sanitary napkins, menstrual sponges,  
          and menstrual cups should also be exempt from sales and use tax.  


          6.   Is it enough?   A recent editorial in the New York Times  
          noted, that even without being taxed, tampons and pads are  
          unaffordable for some individuals.  As a result, the editorial  
          noted that policymakers around the country are offering  
          different proposals for ensuring that women have access to these  
          products.  Specifically, New York City Councilmember Julissa  
          Ferreras-Copeland is working on legislation to require all  
          public schools in the city to provide free tampons and pads in  
          restrooms.  Moreover, in Congress, Representative Grace Meng  
          introduced legislation allowing individuals to pay for feminine  
          hygiene products with their health care spending accounts. 


           Assembly Actions








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           Assembly Revenue and Taxation 9-0
          Assembly Appropriations       18-1
          Assembly Floor                78-0



           Support and  
          Opposition   (6/15/16)


           Support  :  Act for Women and Girls; American Academy of  
          Pediatrics; Asian Pacific Islander American Public Affairs  
          Association; Bayer; Black Women for Wellness; California Asian  
          Pacific Chamber of Commerce; California Grocers Association;  
          California Latinas for Reproductive Justice; California Primary  
          Care Association; California Retailers Association; California  
          State Board of Equalization; California Women's Law Center; City  
          of Glendale; City of West Hollywood; Community Action Fund of  
          Planned Parenthood of Orange and San Bernardino Counties;  
          Conscious Period; Equal Rights Advocates; Fiona Ma, State Board  
          of Equalization Member; Forward Together; George Runner, State  
          Board of Equalization Member; Hispanas Organized for Political  
          Equality; Junior Leagues of California State Public Affairs  
          Committee; Junior League of Long Beach; NARAL Pro-Choice  
          California; National Association of Social Workers-CA Chapter;  
          National Center for Youth Law; National Council of Jewish Women;  
          Physicians for Reproductive Health; Planned Parenthood Action  
          Fund of Orange and San Bernardino Counties; Planned Parenthood  
          Action Fund of Santa Barbara, Ventura, & San Luis Obispo  
          Counties; Planned Parenthood Action Fund of the Pacific  
          Southwest; Planned Parenthood Advocacy Project Los Angeles  
          County; Planned Parenthood Advocates Pasadena and San Gabriel  
          Valley; Planned Parenthood Affiliates of California; Planned  
          Parenthood Mar Monte; Planned Parenthood Northern California  
          Action Fund; Target; Unite for Reproductive and Gender Equity;  
          Walmart; Women Lawyers of Sacramento.

           Opposition  :  California State Association of Counties; League of  
          California Cities.



                                      -- END --








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