Governor Gavin Newsom vetoed
AB 1951 (Grayson), which would have reduced county and city
revenues by more than $2 billion over five years by giving a full
sales tax exemptions for manufacturing equipment. This is
welcome news for CSAC and the broad coalition of local government
organizations that opposed this measure (veto
request).
The reductions in sales and use tax revenue would not only have
been borne by the local agencies that provide direct services to
the manufacturing facility benefitting from the exemption, but
also every county in the state because of the statewide formulas
for distributing the realignment funds that pay for health, human
services, and public safety programs.
AB 1951 would have replaced the current partial manufacturing
sales tax exemption with a full exemption until January 1, 2028,
resulting in substantial revenue loss to local governments.
Presuming no changes in taxpayer behavior, local governments
would have lost an estimated $2 billion over five years,
impacting crucial health, public safety, welfare, and
transportation services.
Counties support California’s manufacturing industry generally
and through local infrastructure incentives. However, as
articulated by Governor Newsom in his veto message, “we cannot
ask our local governments to bear this loss in revenue.” With the
state tax receipts below expectations for the third month in a
row and roughly $2 billion below projections for the fiscal year
to date, Governor Newsom’s
veto message cautioned against new spending commitments, such
as this measure, which are not accounted for in the state budget.
