Local Sales and Use Taxes--Revenue Sharing Legislative Constitutional Amendment.
	Analysis by the Legislative Analyst

Background

The sales tax is an important source of revenue for both the state and local governments, as Californians paid about $29 billion in sales taxes in 1997-98. The sales tax rate has three components:

• A state rate of 6 percent.
• A uniform local rate of 1.25 percent (referred to as the Bradley-Burns rate).
• Optional local "add-on" rates.

Thus, the minimum sales tax rate in all jurisdictions is 7.25 percent. Many jurisdictions have implemented an add-on rate and therefore have a higher sales tax.

The Constitution currently allows counties and cities to enter into contracts to share their revenues from both the Bradley-Burns and other local add-on sales taxes. The contracts, however, must be approved by a majority vote of the people in each affected jurisdiction. We are not aware of any local governments that have used this provision.

Proposal

This proposition provides another way of implementing sales tax revenue-sharing contracts. For Bradley-Burns revenues, contracts could be approved by a two-thirds vote of each affected jurisdiction's governing body (a city council or board of supervisors).

Fiscal Effect

This proposition would not change the total amount of sales tax revenues going to cities and counties. If cities and counties enter into revenue-sharing contracts as a result of this proposition, then there would be a shift of sales tax revenues among these entities.