BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 653|
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THIRD READING
Bill No: SB 653
Author: Steinberg (D)
Amended: 5/31/11
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 6-2, 5/4/11
AYES: Wolk, DeSaulnier, Hancock, Hernandez, Kehoe, Liu
NOES: Huff, La Malfa
NO VOTE RECORDED: Fuller
SENATE APPROPRIATIONS COMMITTEE : 6-2, 5/26/11
AYES: Kehoe, Alquist, Lieu, Pavley, Price, Steinberg
NOES: Walters, Runner
NO VOTE RECORDED: Emmerson
SUBJECT : Local taxation: counties: school districts:
general
authorization
SOURCE : Author
DIGEST : This bill authorizes counties, cities, county
offices of education and community college districts to
impose a local personal income tax, vehicle license fee,
transactions and use tax, extractive business activities
tax, oil severance tax, and excise tax, with voter
approval.
NOTE: Amendments were taken in Senate Appropriations
Committee to: (1) extend the local tax authority to county
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offices of education and community college districts, and
specify that taxes imposed by a county office of education
will be apportioned to school districts on the basis of
average daily attendance; (2) authorize local personal
income taxes to be imposed retroactively to January 1,
2011. All other local taxes would take effect immediately
upon voter approval; (3) require local agencies in which a
new tax is approved to notify the administering state
agency, as well as the Department of Finance and the
Legislature; (4) provide an exemption from the
Administrative Procedures Act for specified state agencies
administering a local tax for the implementation guidelines
or rules related to any local tax imposed under the
authority provided by the bill; and (5) make other
clarifying and necessary implementation changes.
ANALYSIS : Under the California Constitution, local taxes
are either general taxes or special taxes. A "general tax"
means any tax imposed for general governmental purposes. A
"special tax" is any tax imposed for specific purposes.
Local general taxes require majority-voter approval.
Special taxes need two-thirds voter approval.
Under the constitutional municipal affairs doctrine,
charter cities can levy taxes which are not preempted by
the state or federal governments. In contrast to a charter
city, a general law city can impose those taxes allowed by
state statutes. However, the Government Code allows all
general law cities to levy any tax which may be levied by
any charter city unless a different general law limits or
prohibits such a tax. This blanket authority means that a
general law city's authority to tax is similar, but not
identical, to a charter city's authority.
Counties can levy only the local taxes allowed by state
statutes. Unlike charter cities, the charter counties
don't have constitutional authority to levy additional
taxes. Counties can levy utility user taxes, business
license taxes, and transient occupancy (hotel) taxes.
This bill authorizes the governing body of any county or
city and county, county office of education and community
colleges district, subject to constitutional voter approval
requirements, to levy, increase, or extend the following
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taxes:
A local personal income tax not to exceed one
percent on any of all of the residents of the county
or school district.
A local vehicle license fee not to exceed 1.35
percent.
An additional transactions and use tax which would
be excluded from the current two percent combined
county and city, community college district, or a
county office of education rate limit.
The bill allows for local excise taxes but does not limit
counties and school districts to these taxes.
Specifically, the bill allows:
Alcoholic beverage tax of five-cents per five
ounces and at a proportionate rate for any other
quantity. The tax would be imposed on the seller, not
the consumer.
Cigarette and tobacco products tax of up to five
cents per cigarette or one dollar per pack.
Oil severance tax not to exceed 10 percent of the
gross value of the product upon a producer for the
privilege of severing oil from the earth or water in
the county for sale, transport, consumption, storage,
profit, or use, as authorized.
Sweetened beverage tax not to exceed once cent per
fluid ounce.
Local medical marijuana tax.
For the alcohol beverage tax . The bill states that any tax
imposed would not be regulatory within the meeting of
Section 22 of Article XX of the California Constitution,
which pertains to the regulation of the manufacture, sale,
purchase, possession and transportation of alcoholic
beverages.
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This bill requires the Board of Equalization, the Franchise
Tax Board, and the Department of Motor Vehicles to perform
various functions related to the administration and
collection of a local tax if the county or city and county
contracts with the state agency to perform those functions.
For the oil severance tax . This bill exempts a stripper
well in which the average value of oil as of January 1 of
the prior year is less than thirty dollars ($30) per barrel
price of California oil. The DOC provides notification of
all wells that have been certified as a stripper well. A
"stripper well" means a well that has been certified by the
DOC as an oil well incapable of producing an average of
more than 10 barrels of oil per day during the entire
taxable month.
The bill exempts from the local tax all oil owned or
produced by the state and any political subdivision's
proprietary share of oil produced under any unit,
cooperative, or other pooling agreement.
No exemption is provided from payment of an ad valorem tax
related to equipment, material, or other property by reason
of the payment of the gross severance tax pursuant to the
Act.
The local tax will be reduced to zero for a period of 10
years for oil produced from a well that qualifies as a
"hazardous well" or "idle-deserted well") or which has been
inactive for at least the preceding five consecutive years.
The DOC must determine which wells qualify under these
provisions.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee analysis:
Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14
Fund
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Local revenue gains Unknown, very
major revenue gains to Local
counties and school districts that
impose
one or more local taxes.
FTB one-time costs Unknown
significant startup costs to General
establish procedures and mechanisms for
administering local income taxes
(reimbursement likely impractical)
FTB ongoing costs All
ongoing administrative costs paid
Local
by local taxing entities on a
reimbursement basis
BOE one-time costsUnknown significant fixed startup costs
General
that exceed reimbursement authority
BOE ongoing costs Preparatory
costs for each new tax Local
reimbursed as they are incurred, and
ongoing administrative costs reimbursed
upon collection
DOC: certify stripper Annual
costs of up to $3,200 if all
General/
wells wells require
certification
Special*
DMV: VLF admin. $116 one-time
programming costs Special**
ongoing costs reimbursed by local
tax entities
Tax revenue loss Maximum
one-time loss of $150,000
General
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(VLF deductions) if all counties impose 1.35% VLF
(losses reimbursed in the following
year)
____________
* Oil, Gas, and Geothermal Administrative Fund
** Motor Vehicle Account
According to the Senate Appropriations Committee analysis,
total local revenue gains will depend upon the number of
entities imposing a tax, which local taxes are imposed, and
the rates of those taxes. For example, if the following
taxes were imposed statewide at the specified rates, annual
local revenue gains would be:
1% personal income tax on all residents: $8 billion
0.5% transactions and use tax: $2.2 billion
1.35% VLF on all vehicles: $4.6 billion
2% oil severance tax: $378 million
5 cents per cigarette ($1 per pack): $813 million
5 cents per drink alcoholic beverage tax: $16.1
million
Revenue impact of a 1 cent per ounce sweetened
beverage tax is unknown
The bill would require a local taxing entity to contract
with FTB for the administration of a local income tax
approved by voters. FTB indicates that additional staff
and General Fund resources would be necessary to implement
the bill without adversely affecting existing revenue
generating functions. The reimbursement structure
established in the bill would require FTB to incur
significant costs until the local income tax generated new
revenues sufficient to provide reimbursement by the local
entity.
SUPPORT : (Verified 5/31/11)
American Federation of State, County, Municipal Employees
California Federation of Teachers
California Labor Federation
California Nurses Association
California Public Defenders Association
California School Employees Association
California State Association of Counties
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California State Parent, Teacher Association
Laborers' Locals 777 & 792
Los Angeles Unified School District
Peace Officers Research Association
San Bernardino Unified School District
San Diego County Court Employees Association
San Francisco Unified School District
Service Employees International Union, State Council
State Council
Yolo County.
OPPOSITION : (Verified 5/31/11)
Air Logistics Corporation
American Council of Engineering Companies
Anheuser-Busch Companies Inc.
Association California Cable and Telecommunications
Association of California Cities: Orange County
Association of California Life and Health Insurance
Companies
California Aerospace Technology Association
California Apartment Association
California Association of Bed and Breakfast Inns
California Attractions and Parks Association
California Automated Vendors Association
California Bankers Association
California Beer and Beverage Distributors
California Business Properties
California Chamber of Commerce
California Farm Bureau Federation
California Grocers Association
California Hotel and Lodging Association
California Independent Grocers Association
California Manufacturers and Technology Association
California New Car Dealers Association
California Restaurant Association
California Retailers Association
California Spa & Pool Industry Education Council
California State Automobile Association
California Taxpayers Association
California/Nevada Soft Drink Association
Council on State Taxation
Direct Selling Association
Distilled Spirits Council of the United States
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Family Winemakers of California
Garden Grove Chamber of Commerce
Granite Construction
Heineken USA; Insurance Brokers & Agents of the West
Howard Jarvis Taxpayers Association
Incorporated; Grocery Manufacturers Association
Kern County Board of Supervisors
LAX Coastal Area Chambers of Commerce
Los Angeles County Business Federation
MillerCoors
Motion Picture Association of America
National Association of Theatre Owners of California/Nevada
National Federation of Independent Business
Orange County Board of Supervisors
Personal Insurance Federation of California
San Francisco Chamber of Commerce
San Gabriel Valley Legislative Coalition of Chambers
South Bay Association of Chambers of Commerce
TechAmerica
Vending Plus
Western Growers Association
Western States Petroleum Association
Wine Institute
Worldwide Vending
ARGUMENTS IN SUPPORT : The author's office introduced
this bill to let the bill decide on their level of services
in the county and school districts by choosing whether or
not to tax themselves. The California Constitution reminds
us that "All political power is inherent in the people."
California certainly has a rich history of direct
democracy. According to the author's office, if the voters
are not allowed to participate in the decision to extend
state taxes, the Legislature must explore alternative
methods of funding state and local programs. Furthermore,
the author's office states that counties are political
subdivisions of the state which administer state and
federal programs for public safety, public health, child
welfare services, and other programs. If state tax
extensions ultimately are not approved, state budget cuts
will burden counties with new program costs that could
jeopardize public health and safety. This bill gives
counties and schools the tools to raise local revenues, if
their voters agree that revenues should be part of the
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solution.
ARGUMENTS IN OPPOSITION : The groups and associations
that oppose this bill argue that these local taxes will
limit economic growth by lifting decades-old restrictions
that prohibit counties from proposing these local taxes.
They say that this bill effectively eliminates a business's
ability to plan out long-term costs, because business would
be forced to reckon with 58 tax jurisdictions, plus school
districts, each of which may impose taxes that have
different applications, regulations, and rates.
AGB:do 5/31/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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