BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 689
                                                                  Page  1

          Date of Hearing:   May 13, 2009

                        ASSEMBLY COMMITTEE ON APPROPRIATIONS
                                Kevin De Leon, Chair

                   AB 689 (Calderon) - As Amended:  April 23, 2009 

          Policy Committee:                              Revenue and  
          Taxation     Vote:                            6-2
                         GO                                   12-2

          Urgency:     No                   State Mandated Local Program:  
          Yes    Reimbursable:              No

           SUMMARY  

          This bill expands the definition of "tobacco products" contained  
          in both the Tobacco Tax and Health Protection Act of 1988  
          (Proposition 99) and the California Children and Families First  
          Act of 1998 (Proposition 10) to include any articles or products  
          made of or containing tobacco.

           FISCAL EFFECT  

          The Board of Equalization (BOE) estimates that this bill will  
          increase tobacco products revenues by roughly $100,000 per year  
          (special funds).  To the extent that new dissolvable tobacco  
          products enter the California market, revenue gains will be  
          greater.  

           COMMENTS  

           1)Background  .  In 1988, California voters passed Proposition 99,  
            which imposes a tax on the distribution at the rate of 25  
            cents per pack. It also provides for taxation of other tobacco  
            products, at a tax rate equivalent to the rate of tax imposed  
            on cigarettes. In 1998, voters approved Proposition 10, which  
            imposed a  tax on cigarettes at a rate of 50 cents per pack,  
            and provides for an equivalent rate on tobacco products.

            Both propositions defined the term "tobacco products" includes  
            to include "all forms of cigars, smoking tobacco, chewing  
            tobacco, snuff, and any other articles or products made of, or  
            containing at least 50 percent, tobacco, but does not include  
            cigarettes".








                                                                  AB 689
                                                                  Page  2


           2)Rationale  . The author is proposing this bill to address a  
            growing number of products that contain varying levels of  
            tobacco. He also asserts that the state must generally rely on  
            manufacturers representations regarding the percentage of  
            tobacco in products. By eliminating the current 50% threshold,  
            the author claims that the bill ensures that no tobacco  
            product will escape taxation.  

           3)Opponents  (the California Chamber of Commerce) assert that  
            industry-specific tax increases will have negative impacts on  
            jobs and the economy.
           
           Analysis Prepared by  :    Brad Williams / APPR. / (916) 319-2081