BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 138|
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THIRD READING
Bill No: SB 138
Author: Liu (D)
Amended: 4/28/09
Vote: 21
SENATE REVENUE & TAXATION COMMITTEE : 5-2, 4/22/09
AYES: Wolk, Alquist, Florez, Padilla, Wiggins
NOES: Walters, Runner
NO VOTE RECORDED: Ashburn
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SENATE FLOOR : 19-19, 05/26/09 9 (FAIL)
AYES: Alquist, Corbett, DeSaulnier, Ducheny, Florez,
Hancock, Kehoe, Leno, Liu, Lowenthal, Oropeza, Padilla,
Pavley, Romero, Simitian, Steinberg, Wiggins, Wolk,
Wright
NOES: Aanestad, Ashburn, Benoit, Calderon, Cogdill,
Correa, Cox, Denham, Dutton, Harman, Hollingsworth, Huff,
Maldonado, Negrete McLeod, Runner, Strickland, Walters,
Wyland, Yee
NO VOTE RECORDED: Cedillo, Vacancy
SUBJECT : Local taxes: graffiti
SOURCE : Los Angeles City Councilmember Jose Huizar
DIGEST : This bill raises the maximum tax amounts on
products subject to the local graffiti prevention tax.
This bill specifies that local graffiti prevention taxes
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are not subject to the two percent maximum on local
transactions and use taxes.
ANALYSIS : Existing law [AB 3580 (Katz), Chapter 1411,
Statutes of 1990] authorizes local agencies to enact an
ordinance, subject to approval by a two-thirds vote of the
local electorate, to assess a tax of up to:
1. Ten cents ($0.10) per container of aerosol paint,
container or other marking substances, or felt tip
markers with a flat or angled writing surface of a
half-inch or greater.
2. Five cents ($0.05) per felt tip marker or any other
marking instrument.
Existing law requires every retailer engaged in the
business of selling products subject to the tax within the
jurisdiction that enacted the ordinance to collect and
remit the tax to the Board of Equalization (BOE), which in
turn remits the proceeds to the local agency. Local
agencies may only spend proceeds from the graffiti tax on
graffiti prevention and removal, or for educational
programs for at-risk youth to combat graffiti vandalism in
all its forms. However, no local agency has yet enacted
the tax.
This bill increases the above maximum tax amounts to fifty
cents ($0.50) per aerosol container, container of other
marking substances, and felt tip markers with a flat or
angled writing surface of a half-inch or greater, and
twenty-five cents ($0.25) per felt tip marker or other
marking instrument.
Background
As part of February's State Budget Agreement, AB 3XXX
(Evans), California recently increased its sales and use
tax rate to 6.25 percent, resulting in a maximum combined
state and local sales tax rate of 10.25 percent (The City
of Southgate currently applies this rate). One major
component of the combined rates are locally approved
transactions and use taxes, which are capped at two
percent. Last year, the Legislature enacted AB 2321
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(Feuer) which allows the Los Angeles County Metropolitan
Transportation Agency (MTA) to assess an additional .5
percent transactions and use tax specifically exempted from
the two percent cap MTA-area voters approved in November
2008 and will take effect on July 1, 2009. While opponents
point out that the increasing tax rate combined with a
local graffiti prevention tax may result in a combined tax
rate when combined with current economic conditions that
will substantially deter sales of paint, BOE adds that the
measure does not specify whether the graffiti prevention
tax is subject to the two percent cap. BOE suggests that
the tax should not be subject to the cap because it is not
similar to transactions and use taxes because the tax is
applied on each unit sold and not a percentage of the sales
price. BOE, in committee, suggested that the tax should
not be subject to the cap because it is not similar to
transactions and use taxes because the tax is applied on
each unit sold and not a percentage of the sales price. An
amendment to specify that local graffiti prevention taxes
are not subject to the two percent maximum on local
transactions and use taxes was taken.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 5/11/09)
Los Angeles City Councilmember Jose Huizar (source)
Association for Los Angeles Deputy Sheriffs
City of Murieta
League of California Cities
Riverside Sheriffs Association
OPPOSITION : (Verified 5/11/09)
California Paint Council
California Taxpayers' Association
Sherwin-Williams Company
ARGUMENTS IN SUPPORT : According to the author: "This
bill amends the Revenue and Tax Code, which already allows
cities or counties to ask voters if they want to approve a
tax for graffiti removal. The bill increases the amount
that voters can approve up to 50 cents per spray can and 25
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cents per marker. Current state law allows cities or
counties to place on the ballot a tax up to 10 cents per
spray can or 5 cents for each permanent marker. Funding
must be dedicated to graffiti removal. The Legislature
approved this section nearly 20 years ago, and the maximum
tax amounts should be adjusted to reflect current needs.
"Graffiti damages private and public property requires
costly cleanup and harms the quality of life in our
communities. Local governments need additional funding to
combat this crime.
The City of Los Angeles spends $7.6 million each
year from the General Fund on graffiti-fighting
efforts.
Reported graffiti incidents in the Los Angeles
County Sheriff's Department patrol area rose from 2,083
in 2002 to 4,274 in 2006. Countywide, officials spent
up to $30 million in that period on graffiti removal
and tagging suppression.
The California Department of Transportation in 2007
spent about $5 million on graffiti removal in Los
Angeles and Ventura counties alone.
"Local government leaders, law enforcement, and community
groups have worked together to develop successful
graffiti-prevention programs. Criminal penalties were
increased. Ordinances allow local governments to levy
civil fines against taggers. Nonetheless, problems
persist. Local governments need additional funding for
graffiti cleanup efforts, particularly when graffiti
endangers a community's quality of life."
ARGUMENTS IN OPPOSITION : Opponents to the bill assert
that the bill's increases in the maximum tax amounts are
too much, instead suggesting lower amounts of $0.25 per
aerosol can because consumers may choose to buy paints over
the Internet (where the sales and use tax may or may not be
collected), thereby penalizing in-state businesses that
collect and remit the tax by increasing the price of these
products by the amount of the tax. Opponents also argue
that the bill's maximum tax amount may be too high to pass
the incidence of tax onto consumers, thereby penalizing
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California businesses instead of persons who engage in
graffiti. Tax incidence theory posits that taxes are paid
by consumers or suppliers based on price elasticities of
supply and demand, or whether the supplier can incorporate
the tax in the final price paid by the consumer without
affecting the price or quantity of goods sold. Opponents
add that Internet sales provide more options for consumers,
increasing the difficulty to pass the tax onto the paint
purchaser.
DLW:mw 5/29/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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