Special Session: Response to Assembly Hearing Questions

We recently presented testimony at Assembly and Senate special session hearings concerning funding Medi-Cal and developmental services programs. (See our office's special session handouts here.) In the July 9 hearing of the Assembly Committee on Public Health and Developmental Services, we were asked several questions about non-health care tax funding options. (See video here beginning at 01:52:00.) This note answers some of the Assembly Members' key questions from that hearing.

Broad Power to Tax. As we noted at the hearing, the Legislature (generally, with a two-thirds vote) has broad power to approve tax increases. Should it decide to increase taxes, the Legislature would have to decide how to allocate any increased tax revenues, whether to Medi-Cal and developmental services programs or to other programs or initiatives.

Responses to Questions. Following are responses to some questions from Members at the hearing. In general, we refer to data provided by external sources to facilitate a timely response. Comparisons of taxes between states are among the topics where methodologies (and viewpoints) can vary between sources. Data also may differ between sources depending on the time at which it was compiled. (While we cite sources below that appear to be reliable, we do not endorse or disagree with other entities' viewpoints on these particular taxes.)

• California's Alcohol Taxes Versus Other States. One source of rankings for state excise tax levels is the Tax Foundation. According to this organization, as of January 1, California's beer excise tax rates ranked 28th highest among the 50 states, its tax on distilled spirits ranked 39th highest, and its excise tax on wine ranked 44th highest. The Federation of Tax Administrators also provides a detailed list of states' beer, spirits, and wine excise tax rates, as does the Tax Policy Center. A limited number of jurisdictions outside of California have variants of alcohol taxes called "mixed beverage taxes," as discussed briefly at the hearing.
• California's Tobacco Taxes Versus Other States. Including cigarette tax rate increases in several other states that take effect this summer, the Campaign for Tobacco Free Kids calculates that California's cigarette excise tax rate (87 cents per pack) ranks 35th highest among the 50 state jurisdictions plus Washington, D.C. This organization estimates that the average excise tax in all states is $1.60 per pack. As of January 1, 2015, the Tax Foundation had estimated that California ranked 32nd highest for this excise tax. As of January 1, the Tax Policy Center ranked California's cigarette tax rate 33rd highest among state jurisdictions plus the District of Columbia. Tax administrators' data on cigarette and other tobacco product excise tax rates as of January 1 also is available.
• Taxes on Medical Marijuana Products. In a 2012 initiative analysis, we estimated that a supplemental tax on medical marijuana sales of 2.5 percent would generate revenue totaling in the low tens of millions of dollars annually. We note any such estimate is subject to significant uncertainty as statewide data on medical marijuana dispensaries and the taxes they pay is limited.