BILL ANALYSIS �
SB 508
Page 1
Date of Hearing: July 6, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 508 (Wolk) - As Amended: June 20, 2011
Policy Committee: Revenue and
Taxation Vote: 6-2
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This requires any bill introduced after January 1, 2012 that
authorizes a personal income or corporation tax credit to
contain, among other provisions: (a) specified goals, purposes,
and objectives; (b) detailed performance indicators to measure
whether the credit is meeting those goals; and (c) a requirement
that the credit become inoperative 10 years after its enactment.
FISCAL EFFECT
1)No direct impact on state revenues or costs, because the bill
applies prospectively, and future legislation could be drafted
to exempt itself from the requirements of SB 508.
2)However, the bill could result in an unknown, but potentially
significant increases in revenues to the extent the sunset
requirement is operative and tax credits expire or the
information required in this bill leads to the Legislature to
decide some tax credits are ineffective and repeals them.
COMMENTS
1)Rationale. The sponsor of the bill, the California Labor
Federation, asserts that it brings much needed performance
review and oversight to tax expenditure programs in order to
make them more transparent and effective.
2)Background . State and federal income tax law provides for
various tax credits, deductions, exclusions, exemptions and
other tax preferences that are collectively referred to as tax
SB 508
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expenditures. There are tax expenditure reporting
requirements, but no sunset requirements, in state law. As
matter of practice, however, most new tax credit bills contain
sunset language.
3)Opposition . The California Chamber of Commerce and other
business groups oppose the bill, asserting that it would
create uncertainty regarding long-term tax planning, thereby
reducing the incentive effects of the measure.
4)Other Issues . The codifying sunsets for all tax credits could
be seen as attempting to bind future Legislatures. As a
practical matter, one Legislature cannot bind the actions of
future Legislatures, and there is nothing to prevent future
tax measures from containing language that exempts future
legislation from the sunsets required by this bill.
5)Previous legislation . SB 1272 (Wolk), introduced in the
2009-10 legislative session, was nearly identical to this
bill. Governor Schwarzenegger vetoed SB 1272 stating that,
"While the sponsors seem intent on eliminating measures that
will generate jobs and stimulate the economy, the average
California taxpayer would probably be better served if the
Legislature were willing to automatically sunset every new
spending entitlement, program expansion and business mandate
after 7 years."
Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081