BILL ANALYSIS
SB 138
Page 1
Date of Hearing: August 19, 2009
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Kevin De Leon, Chair
SB 138 (Liu) - As Amended: July 15, 2009
Policy Committee: Revenue and
Taxation Vote: 6-2
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill increases the maximum amount of local graffiti
prevention tax that could be levied by local governments on
aerosol paint containers and certain felt tip markers, and
narrows the scope of products subject to the tax. Specifically,
the bill:
1)Increases from $0.10 to $0.25 the maximum amount of tax that
may be imposed by a city or county on the sale of aerosol
paint containers, and from $0.05 to $0.25 for certain felt tip
markers. Under existing law, such taxes must be approved by an
ordinance approved by two thirds of the voters.
2)Deletes the existing definition of "aerosol paint container"
and instead defines "aerosol paint container" to mean, among
other things, a container that dispenses ingredients by means
of a propellant for ground traffic or ground marking
applications.
3)Specifies that the term "aerosol paint container" does not
include aerosol lubricants, mold releases, automotive
underbody coatings, electrical coatings, cleaners, belt
dressings, antistatic sprays, layout fluids and removers,
adhesives, maskants, rust converters, dyes, ink, leather
preservatives, and cleaners.
4)Narrows the scope of markers that are subject to the tax to
just felt tip markers that have a flat or angled writing
surface of one-half inch or greater that contains an ink that
is not water soluble. Currently the tax applies to the
above-described markers as well as "other marking
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instruments."
5)Provides that the graffiti prevention tax, including the
increase in the rate proposed by this bill, is not subject to
the 2% maximum combined rate cap for local district sales and
use taxes.
FISCAL EFFECT
1)Revenues from this tax depend on the extent to which the
increases result in local jurisdictions adopting the graffiti
prevention tax. As an illustration, if the increase were to
result in all local jurisdictions levying the graffiti tax,
total revenues from the graffiti tax would be $88 million. If
just Los Angeles County approved the tax, the total would be
$24 million.
2)Annual administrative costs to the BOE would be significant,
ranging up to several million for large counties. These costs
would be reimbursed by the local jurisdictions levying the
tax.
COMMENTS
1)Background . Under existing law, cities and counties may impose
up to 1% sales and use taxes under the Bradley-Burns Uniform
Local Sales and Use Tax Law. Local governments are also
authorized to levy additional local sales taxes (called
"district taxes") for general or special purposes, subject to
voter approval, provided that the combined rate of tax in the
county does not exceed 2%.
In addition to the district taxes, cities and counties are
authorized to levy a graffiti prevention tax for the privilege
of selling aerosol paint containers, containers of any other
marking substance, specified felt tip markers and other making
instruments. The graffiti prevention tax may be levied only if
the local agency governing board enacts an ordinance that is
approved by at least 2/3 of qualified voters. The graffiti
prevention tax has been authorized since 1991, but no local
jurisdiction has levied the tax. The proponents of this bill
state that few local agencies have tried to enact this tax
because the maximum amounts are currently too low to generate
revenue sufficient to offset graffiti abatement costs.
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2)Rationale. This bill is sponsored by Los Angeles City
Councilman Jose Huizar. According to the author's office,
local government leaders, law enforcement, and community
groups have worked together to develop successful
graffiti-prevention programs, yet problems continue to
persist. Local governments need additional funding for
graffiti cleanup efforts, particularly when graffiti endangers
a community's quality of life.
3)Opponents indicate that, given the recession and recent tax
increases levied on consumers and businesses, this is not the
time to consider new local taxes. Also, the Board of
Equalization notes that the graffiti tax would be relatively
expensive to administer, and would impose an additional
accounting burden on retailers. The retailers would be
required to segregate sales of the specific items for proper
reporting and a separate computer program may be required to
provide a receipt to customers for the graffiti tax.
Analysis Prepared by : Brad Williams / APPR. / (916) 319-2081