BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 686 HEARING: 6/15/11
AUTHOR: Huffman FISCAL: No
VERSION: 3/9/11 TAX LEVY: No
CONSULTANT: Miller
Transactions and Use Tax increments
Allows jurisdictions to propose transactions and use taxes
as 0.125% instead of 0.25%.
Background and Existing Law
Cities and counties may impose a district tax for general
or specific purposes. These taxes can be imposed either
directly by the city or county or through a special purpose
entity established by the city or county. Counties can
also establish a transportation authority to impose
district taxes under the Public Utilities Code.
Beginning April 1, 2011, there will be 132 local
jurisdictions (city, county, and special purpose entity)
imposing a district tax for general or specific purposes.
Of the 132 jurisdictions, 40 are county-imposed taxes and
92 are city-imposed taxes.
The combined rate of all district taxes imposed in any
county shall not exceed 2%. District taxes increase the
tax rate within a city or county by adding the district tax
rate to the combined state and local (Bradley-Burns local
tax) tax rate of 8.25%.
Generally, district tax rates are imposed at a rate of
0.25% or 0.25% increments up to the 2% limit. Currently,
the district tax rates vary from 0.10% to 1%. The combined
state, local, and district tax rates range from 8.375% to
10.25%, with the exception of the cities of South Gate and
Pico Rivera (10.75%) in Los Angeles County.
Some cities and counties have more than one district tax in
effect, while others have none. A listing of the district
taxes, rates, and effective dates is available on the BOE's
website: www.boe.ca.gov/sutax/pdf/districtratelist.pdf .
AB 686 -- 3/9/11 -- Page 2
For purposes of funding libraries, a county may impose a
district tax at a rate of either 0.125 or 0.25% for a
period not to exceed 16 years, if the ordinance proposing
the tax is approved by the board of supervisors and a
two-thirds vote of the qualified voters of the county. The
revenues are to be used exclusively for funding public
library construction, acquisition, programs, and operations
within the county.
The current sales tax structure:
6 percent state sales tax*
percent state sales tax, Local Revenue Fund dedicated
to local governments
percent state tax dedicated to local public safety
services
1 percent Bradley-Burns Uniform Local Sales and Use Tax,
allocated to cities and counties with .25 percent for
county transportation funds and .75 percent for city and
county operations.
percent state Fiscal Recovery Fund for changes
associated with the voter approved Economic Recovery Bond
Act, operative July 1, 2004
TOTAL: 8- percent
Local districts, through a special taxing jurisdiction
(transactions and use tax), can levy a tax ranging from
0.25% to 2%.
Proposed Law
Assembly Bill 686 allows cities and counties to impose a
district tax in increments of 0.125%.
State Revenue Impact
No estimate.
AB 686 -- 3/9/11 -- Page 3
Comments
1. Purpose of the bill . According to the author: "current
law allows cities and counties to propose tax measures to
voters to pay for local services, such as public safety,
schools, roads, parks, or libraries. This bill will allow
voters to approve taxes in smaller increments, giving local
governments flexibility to raise a more targeted amount of
money to meet a specific community need while retaining
current requirements for voter approval of tax measures."
2. Cost benefit . The BOE's administrative costs are
driven by the workload involved in registering taxpayers,
processing returns and payments, and performing audit and
collection activities. These costs are relatively fixed.
The cost of administering the tax is not related to the
revenue generated by the tax. However, the ratio of such
costs to the amount of revenue generated by the tax varies
inversely with the tax rate. Therefore, if the tax rate or
volume of taxable sales is very low, the ratio of cost to
revenue will be high.
3. A special tax . Under the Transactions and Use Tax Law,
counties are authorized to impose transactions and use
taxes for general or special purposes at a rate of 0.25%,
or multiples of 0.25%, subject to voter approval. With the
exception of one section that authorizes counties to impose
a tax at a rate of 0.125 or 0.25% for library purposes,
counties impose transactions and use taxes at a rate of
0.25 percent, or multiples of 0.25%.
Currently, there are four counties that levy a library
purposes tax at a rate of 0.125% (Fresno, Nevada, Solano,
and Stanislaus).
Assembly Actions
Assembly Revenue and Taxation: 6-3
Assembly Floor: 47-26
Support and Opposition (06/09/11)
AB 686 -- 3/9/11 -- Page 4
Support : California Professional Firefighters; California
Tax Reform Association; California State Association of
Counties; County of Marin; League of California Cities.
Opposition : California Taxpayers Association; Howard
Jarvis Taxpayers Association.