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Recent Court Decision Likely Unleashes Additional Spate of Local Taxes in CA
California’s “Citizens United”
A game-changing decision issued by the California Supreme Court appears to eviscerate taxpayer protections provided under Proposition 13 and Proposition 218 (the Right to Vote on Taxes Act) that require a 2/3rds majority vote to pass tax measures. The result could be a tax tsunami funded by special interests masquerading as individuals.
This is a watershed moment.
With both these bombshell court cases – Citizens United v. FEC at the Federal level, and California Cannabis Coalition v. City of Upland – individual citizens’ rights are diminished by a decision that increases the power of unions, corporations and ultra-rich individuals.
In California Cannabis Coalition v. City of Upland, the court determined that the local initiative process does not have to comply with Proposition 218. Pursuant to the court’s decision, a local initiative seeking voter approval for a tax or fee may need to garner only a 50% majority vote rather than the higher 66.66% percentage required of a tax ballot measure under proposition 218.
Why does this matter?
Of particular concern is the prospect that special interest groups could capitalize on this decision by placing “local initiatives” on the ballot, ostensibly sponsored by citizen groups, but in fact backed by well-financed promoters.
As the hurdle to passage drops from Proposition 218’s super-majority requirement to a simple majority, more tax measures could be approved and our tax burdens increased.
Proposition 218, enacted to strengthen Proposition 13, mandates that most new “special” local taxes and fees be approved by voters via ballot measures. Those measures are placed on the ballot by a revenue-seeking entity (e.g., school district, transportation agency, municipality, etc.) and take the form of a parcel tax, sales tax, bond, fee, or other special assessment. Approval of a special tax requires approval by 2/3 of voters, except for school bonds, which need only 55%. (General services measures, in which there are no restrictions on the use of the funds, require only a simple majority vote.)
Taxpayer advocates such as Jon Coupal, President of Howard Jarvis Taxpayers Association (which represented Upland in the latter stages of its legal battle) instantly decried the recent California court decision’s potentially explosive implications. In the wake of the court ruling, all it may take for well organized special interests to get a new tax approved would be to hire a signature gathering firm to front for a “citizen group” – followed up with a deep-pocketed PR campaign to sway voters
The opportunity to end run Proposition 218 is obvious.
This type of professionally engineered maneuver would also circumvent the softer taxpayer protections provided by the current process under which local jurisdictions and agencies develop new tax measures. These include the requirement for public hearings; campaign contribution disclosures; and constituents’ ability to (at least occasionally) “throw the bums out.”
It’s not difficult to imagine a scenario in which voters are persuaded to approve a ballot measure concocted and promoted by dark money, or one in which a local jurisdiction colludes with allied special interests (e.g., public employee unions, construction trades, investors or financiers) to raise taxes to fund operations, pension liabilities or major capital projects.
Any action to redress the California Cannabis decision’s impact on taxpayers will almost certainly be spearheaded by Howard Jarvis Taxpayers Association. HJTA's President, Jon Coupal, will be the featured speaker October 19 at a very timely Taxpayer Town Hall hosted by Marin’s Coalition of Sensible Taxpayers, 7-8:30PM at Corte Madera Community Center. Coupal's talk will tie statewide developments to the spate of new taxes affecting Marin residents.
HJTA has already announced – in an August 28 press release -- its readiness to legally challenge potential abuses of proposition 218 prompted by the court’s decision:
“If local initiatives are exempt from critical taxpayer protections, then public agencies could easily deny taxpayers their rights by colluding with outside interests to propose taxes in the form of an initiative, then submitting a tax under a lower vote threshold than that currently mandated by the constitution. The worst case scenario would be if a local government were to rely on this case as legal authority to impose a tax without any election at all. However, if that were attempted, we would commence a new lawsuit immediately.”
HJTA also signaled that a Constitutional Amendment – via ballot initiative – may be required to put the genie back in the bottle, restoring the protections of Propositions 13 and 218.
Regrettably the “fixes” – legal challenges and/or Constitutional Amendment – could take years to unfold. And, the wheels of justice grind slowly. A legal challenge can’t even start until an appropriate case emerges.
A ballot initiative to “fix” the court’s decision (e.g., by constitutionally instituting the 2/3rds majority for Citizen tax initiatives) would be very hard fought. With well-funded special interests and perhaps individual rights groups lined up against taxpayer advocates, it’s unclear whether an initiative could garner enough votes to restore Proposition 218’s protections.
In the interim, be prepared for a wave of new tax measures from sponsors emboldened by the apparent lowering of the hurdles to passage.
A new taxpayer revolt may ultimately climax this saga. The intervening chapters could be drawn out, painful, and have some potentially irreversible consequences to those struggling to hang on to the California dream.