Assemblyman Roger Dickinson, D-Sacramento, has introduced a measure to ban online sales of all tobacco products, including cigarettes, cigars and e-cigarettes. Dickinson says the bill, Assembly Bill 1500, would help state regulators combat teen smoking.

“Although great progress has been made to curb teen smoking, the use of e-cigarettes and the internet availability of tobacco products pose a serious risk,” Dickinson said in a press release. “AB1500 will make it impossible for young people to order e-cigarettes or other tobacco products online thereby safeguarding them from the dangers of smoking.”

Although Dickinson has made teen smoking central to his media pitch, the real battle over AB1500 is over the dollars and cents at stake in online cigarette sales. Unsurprisingly, state tax collectors are anxiously hoping new regulations will boost state coffers.

Online sales result in tax ‘breakage’

Dickinson’s bill, which blocks a segment of the online marketplace, is expected to generate $24 million in tax revenue for the state. At first blush, that might sound a bit counterintuitive: How could a bill that bans commerce generate more revenue for the state?

Smokers who buy tobacco products online won’t quit smoking. Consequently, the ban is expected to redirect online sales to brick and mortar stores. With online transactions, there’s more tax “breakage,” sales and use tax that is either never charged or collected.

“By requiring purchases at brick-and-mortar retailers, it will ensure that tax revenue is collected,” said Taryn Kinney, Dickinson’s communications director. “The purpose of the bill is aimed at limiting access to tobacco products for teenagers but the additional tax revenue is an added benefit.”

The state Board of Equalization, which administers the state’s sales and use tax laws, has yet to take a position on the bill but acknowledges the difficulty in tracking e-commerce.

“The BOE has no formal revenue estimate for eCigarette sales,” said Venus Stromberg, a spokeswoman for the Board of Equalization. “Since there is no excise tax on these products, and no licensing requirements, BOE does not track these purchases.”

Although the Board of Equalization doesn’t track online purchases, it has implemented a program, the Cigarette and Tobacco Product Internet Program, to pursue use tax from consumers that purchase tobacco products from out-of-state Internet retailers. Federal laws also assist the state with this program.

“Currently, federal laws such as the Jenkins Act and PACT Act assist with tax collection by requiring out-of-state sellers to submit reports to each state’s tax agency of their cigarette and certain tobacco sales made to residents,” Stromberg said.

State taxes on cigarettes are hefty

With nearly a dollar of taxes on each pack of cigarettes, state tax collectors have reason to track down online sales. Of the 87 cents in taxes per pack of cigarettes, the Board of Equalization says that 50 cents goes towards programs that  “encourage proper childhood  development, including the  development of professional and  parental education and training,  informed selection of childcare,  development and education of  childcare providers, and research  into the best practices and  standards for all programs and  services relating to early childhood  development.”

The remaining tax funds are distributed with 25 cents for tobacco-related health education programs and disease research; 10 cents for the state’s  General Fund; and two cents for the Breast Cancer Research Fund.

“With proper outreach to consumers, eCigarette purchases would be redirected to brick and mortar stores in CA where there is oversight with regard to compliance with the tax laws,” said Stromberg, a Board of Equalization spokeswoman.

Unique tax issues behind retailers vs. onlight fight

Online sales of tobacco products, just like all e-commerce, pose unique tax issues. Right now, the amount of taxes owed to the government is the same for online sales and brick and mortar transactions. The difference lies with the reporting and collection obligations. Retailers collect sales taxes at the point of sale, whereas with online sales, consumers are obliged to report use taxes.

Earlier this year, U.S. Sen. Lamar Alexander, R-Tenn.,  vowed to reintroduce legislation that would allow states to require online retailers to collect sales taxes. Known as the Marketplace Fairness Act, the bill would switch the tax obligation from consumers to online retailers. It is backed by some business groups that represent brick and mortar retailers.

Critics of the Marketplace Fairness Act say the legislation would force small online businesses to adhere to thousands of tax regulations.

“For the first time, online merchants would be forced to collect sales taxes for all of America’s estimated 9,600 state and local taxing authorities,” the Wall Street Journal cautioned in an editorial against the bill. “New Hampshire, for example, has no sales tax, but a Granite State Web merchant would be forced to collect and remit sales taxes to all the governments that do. Small online sellers will therefore have to comply with tax laws created by distant governments in which they have no representation, and in places where they consume no local services.”

In California, online retailers have largely given into the online tax push. In 2012, Amazon, the world’s largest online retailer, cut a deal with Gov. Jerry Brown to begin collecting sales tax on transactions involving California residents.

Dickinson’s bill once again makes California a leader in the effort to restrict online commerce. His spokesperson says it’s justified to treat tobacco products differently from other products and impose an outright ban on online sales.

“Tobacco products should be treated differently because each day in the United States, nearly 4,000 under 18 smoke their first cigarette, and an estimated 1,000 youth in that age group become new daily cigarette smokers,” said Kinney, Dickinson’s communications director.  “The Internet is currently the only way a minor can purchase tobacco products in California that does not require age verification.”

Thus far, the industry isn’t weighing in on the issue. The Cigar Association of America, Inc. declined to comment for this story.

By John Hrabe

From social issues to business regulations, Sacramento is considered a national leader in progressive politics. “Conservative” might be the last adjective used to describe the California Legislature — except when it comes to estimating the fiscal impacts of its legislative proposals.

A CalWatchdog.com analysis of several high-profile bills has identified a pattern: the state Legislature’s committee consultants routinely understate the fiscal effects of gun-related legislation. In some cases, the legislative analyses ignored, omitted or outright contradicted the opinions of other state agencies, including the Department of Finance and State Board of Equalization.

With thousands of bills introduced each session, state legislators lack the time and patience to independently review each bill. To expedite a legislator’s decision-making, caucus staff and committee consultants prepare bill analyses that examine the policy arguments, fiscal effects and opinions of major groups and industry associations.  These legislative “CliffNotes” wield tremendous power and influence over a legislator’s vote.

Given the state’s perpetual budget problems, the fiscal effects of a bill are a top concern of legislators — in some cases with the power to make or break a legislator’s vote. Bill analyses that routinely underestimate the costs to taxpayers, therefore, remove a major obstacle to a bill’s passage.

SB 475: Department of Finance objections ignored

Senate Bill 475, authored by Sen. Mark Leno, D-San Francisco, would give the county of San Mateo and the city and county of San Francisco the power to end gun shows at the Cow Palace, a state-owned Bay Area venue that has hosted multiple gun shows in its 72-year history.

On April 16, the Senate Public Safety Committee approved the bill on a party-line vote and referred it to the Senate Appropriations Committee. Under legislative rules, all bills that have a fiscal cost to the state must be reviewed by the Appropriations Committee. But on April 29, instead of being reviewed by the all-important fiscal oversight committee, the bill went directly to the Senate floor, pursuant to a special legislative rule. Senate Rule 28.8 allows the committee chair to waive hearings for bills that are “without significant fiscal impact.”

Not everyone agreed that the bill was “without significant fiscal impact” to the state. According to the Department of Finance’s bill analysis, the legislation would cost the state hundreds of thousands of dollars in revenue and jeopardize the budget of what has been a self-supported facility.

“Gun shows produce an estimated $150,000-$180,000 in rental fee revenue each year,” the governor’s fiscal experts wrote in their opposition to the bill. “This bill would likely decrease state and local tax revenue generated by gun shows held at the Cow Palace.”

Despite the Department of Finance’s objections, the measure passed the Senate on May 2, with two Democrats joining all Republicans in opposition.

AB 711: Non-lead ammo bill

Another controversial gun bill, AB 711 by Assemblyman Anthony Rendon, D-Lakewood, would require hunters to use only non-lead ammunition for shooting wildlife in California. In its analysis of the bill, the Assembly Appropriations Committee identified two fiscal effects:

“1) Minor costs, probably less than $50,000 for DFW (Department of Fish and Wildlife) to develop regulations to certify ammunition as nonlead and distribute educational materials.

“2) Extending current nonlead enforcement would result in minor, if any, additional costs for the law enforcement division of DFW.”

Those concerns ignored other concerns raised by the Department of Finance in its analysis of the bill—lost revenue from a decline in hunting licenses and ammunition sales.

“DFW notes that the department could experience a decrease in hunting licenses sold if hunters decide not to renew their licenses due to the restrictions of the new provisions, or if the non-lead alternatives become unavailable,” the Department of Finance wrote. “Additionally, a reduction in license sales may lead to a reduction in the excise tax collected from ammunition sales, which is a primary source of wildlife conservation funding.”

While the Department of Finance concluded these costs were “unknown,” its rough estimation showed a possible multi-million-dollar revenue loss to the state. “In 2013, the state issued 278,000 hunting licenses. Using the current resident rate for a hunting license of $44.85, and assuming a 75% decrease in license sales, DFW would realize approximately $9 million in decreased revenues,” the agency estimated.

In addition to a substantially different fiscal analysis, the Department of Finance gave greater attention to the bill’s potential conflict with federal regulations. Non-lead ammunition is classified by the Bureau of Alcohol, Tobacco, Firearms and Explosives under its armor-piercing ammunition prohibition. The legislative analysis quickly glossed over the issue at the end of the analysis, under a section about opponents’ concerns.

When the bill reached the Assembly floor, legislators received another bill analysis, which once again excluded any reference to the Department of Finance’s potential $9 million revenue loss. The measure passed on a 44-21 vote.

AB 187: New 10 percent bullet tax

Assembly Bill 187, by Assembly members Rob Bonta, D-Oakland, and Roger Dickinson, D-Sacramento, would impose a new 10 percent tax on all ammunition sales in the state. The bill tasks the state Board of Equalization with the responsibility of administering and collecting the new ammo tax.

Consequently, the Board of Equalization and its policy analysts reviewed the bill to estimate its fiscal effects and administrative burdens. It reached the conclusion that the state would “incur substantial costs” from the bill. The tax agency identified seven tasks that must be completed in order to administer the new tax, including the creation of a new tax return form, the development of new regulations and training agency staff on the new restrictions.

However, the Assembly Appropriations Committee analysis neglected any mention of the BOE’s cost concerns. That’s not for lack of awareness of the agency’s analysis. The Appropriations Committee analysis included the BOE’s estimations of the bill’s revenue upside.

“The BOE estimates that this bill would generate annual ammunition tax revenues of about $90 million,” the legislature’s analysis states.

By Katy Grimes

At the California Democratic Party Convention this past weekend, Democrats killed efforts led by other Democrats to call for much needed public school reforms.

During the 2010-11 school year, more than 720,000 students in California’s public schools were suspended or expelled. In 2009-10, more than 400,000 students in California public schools were suspended at least once.

Are there really that many discipline problems in California’s public schools?

While many different public policy groups have been busy providing research focused on the higher rates of the suspensions and expulsions of minority students, the sheer numbers of suspensions indicate a growing problem, but not necessarily with misbehaving students.

“Too many schools have implemented overly aggressive policies,” Assemblyman Roger Dickinson, D-Sacramento, said. Dickinson is the chairman of the Assembly select committee which heard testimony from experts last week about what is going on in California schools, and how delinquency prevention can take place.

After the hearing, I asked Dickinson about the suspension problem, and he acknowledged that many teachers aren’t dealing with the problems. He said most are just making the problem student someone else’s problem by suspending them.

But missing from the list of experts and speakers were teachers. Teachers are the front line of defense in dealing with real disciplinary problems, and should have been present at the hearing to discuss why so many students are being suspended.

“Schools need to figure out what is the institutional change they want,” said Lance Izumi, director of Education Studies at the Pacific Research Institute, CalWatchdog.com’s parent think tank. “Are suspensions just the easy way of doing things?”

The current picture

Many of today’s schools sound more like prisons that healthy bastions of educational learning.

Elijah Muhammad, a student at Sacramento City College, told the committee in 2011, while still in high school, that he was falsely charged with assault and put in jail. Once he was cleared of the assault charges, he tried to go back to his high school, but the administration would not let him. He ended up graduating from a continuation high school, and is now a college student.

He said he tried to speak with the administration about his unique situation, but no one would even meet with him. He was treated like a criminal.

Gabriel Browner, a student at Grant Union High School, said that at his high school, the students are targeted by teachers, who suspend the same students over and over. And Browner told of an interesting and vindictive twist: in-school suspensions.

Browner said if a student is disciplined with an in-school suspension, they attend suspension in another room in the school, but are not allowed to make up class work or tests. Students can have up to three in-school suspensions before an out-of-school suspension is issued.

Browner said many of the teachers are vindictive, and the suspensions are bullying tactics. He said teachers abuse “willful defiance,” the catchall behavior label for any disruption in classrooms.

Some experts believe the in-school suspensions were created to save the school funding which is based on Average Daily Attendance per pupil. The schools get the money only if a student attends class.

Zero tolerance is being abused

After the 1999 shootings at Colorado’s Columbine High School, many schools adopted policies that required harsh penalties for even minor misconduct. This was done with the hope that schools would somehow become safer.  “Zero tolerance” became the school rallying cry.

The term “willful defiance” is currently under scrutiny, as its vague definition is what has allowed teachers to suspend so many students for any behavior that disrupts class.

Experts argue it is a catchall phrase that needs to be eliminated because of the overuse for even trivial offenses. And many experts say it is disproportionately used against African-American and Latino boys, and harms the students who need most to stay in school.

Dickinson has authored AB 420 to limit the use of willfully defying authorities or disrupting school activities as a reason to suspend or expel students.

Prevention is the key

Rosalinda Hill and Maisie Chin, co-founders of Community Asset Development Re-Defining Education, CADRE, said it took many students and their families speaking up about the suspension policies to bring this problem to a head.

In lieu of holding just parents accountable, CADRE works with and organizes parents to be able to dig in to the obstructions parents find, as well as the often poor treatment of their children.

But what CADRE found is that students aren’t just receiving suspensions, many are “pushed out” of school.

Dickinson asked Chin how the state might pay for the changes. Chin said there is profiting off of the suspensions because of the many programs created.

Chin said educators instead have to stop looking at these issues as programs, and recognize schools have to develop students as human beings, and not just teach to the tests.

Dr. Robert Ross, President of The California Endowment,  a health foundation created “to address the health needs of Californians,” said his organization recently conducted a poll, which found:

* Four in five voters believe that California school discipline policies need changing.

* Californians voice high levels of support for preventive approaches to school discipline, such as teaching character development and conflict resolution from a young age and teaching positive behavior and skills for managing emotions and making better decisions.

* The survey shows 85 percent of respondents said teachers should have more tools to manage discipline in their classroom, with large majorities supporting expanding student access to counseling services, mental health and substance abuse services.

* Voters understand the serious consequences that can occur when children are suspended or expelled from school.

* Students favor counselors over armed guards in schools.

Ross said schools need more mental health care as well as nurses available to students.

The next step

The next hearing held by the Assembly Select Committee needs to have the CTA present.

“The clash over education had been building throughout the three-day convention, underscoring a larger debate taking place in education circles,” the Los Angeles Times reported. “A spokeswoman for StudentsFirst said the party failed over the weekend to discuss any concrete steps to improve education.”

The suspension issue isn’t just a discussion of race; it’s a bigger issue of California public schools adequately educating all of the students in attendance, and not just the compliant ones.