Desert News Post

California Commentary: Tax vs. Fee

– Posted in: DNPW5

By John Coupal

President of the Howard Jarvis Taxpayers Association

In its 38-year history, Proposition 13 has been under constant assault. The attacks have come from the Legislature, the media and especially the courts. After initially being upheld against a myriad of constitutional challenges, the California Supreme Court then began punching loopholes in the landmark tax reform measure.

Prop 13 was intended, first and foremost, to limit out-of-control property tax increases that were forcing tens of thousands of Californians out of their homes. It did this by imposing a 1 percent cap on the base property tax known as the ad valorem tax and limiting subsequent increases to 2 percent annually. But Howard Jarvis and the voters were well aware how creative local governments could be in dreaming up new kinds of taxes to make up for the tax relief conferred on property owners by Prop 13. For that reason, it also imposed a two-thirds vote requirement on other local taxes. Today, because of court rulings and other constitutional taxpayer protections — includingProposition 218, sponsored by the Howard Jarvis Taxpayers Association — local taxes going into a general fund require a simple majority vote of the electorate while taxes intended for special purposes require a two-thirds vote.

The two-thirds vote is important because taxation is government’s most draconian power and as a prerequisite to its exercise the constitution requires a higher degree of consensus. Constitutionally imposed two-thirds vote requirements are common. The United States Constitution, for example, mandates supermajority votes in a dozen instances.

Not surprisingly, local governments and tax-receiving interests detest the two-thirds voter requirement as a burdensome impediment to their efforts to extract ever more tax dollars from local citizens. But the tax-and-spend crowd need to be reminded that one definition of democracy is two wolves and a sheep voting on what’s for dinner.

According to Prop 13 detractors and some media reports, a recent Court of Appeal decision calls into question the viability of the two-thirds vote requirement. While the decision contains some troubling language, some of the commentary has significantly overstated the scope of that ruling.

The decision which is drawing so much attention is California Cannabis Coalition v. City of Upland and in determining this ruling’s impact on Proposition 13, it is important to note how the court itself defined the issues: “The issues raised here [are] whether the imposition of the [cannabis] Initiative’s $75,000 fee is a tax or a fee and whether pursuant to [Proposition 218] the Initiative must be placed on a special election ballot.” Glaringly absent is any mention of the two-thirds voter requirement imposed by Prop 13.

Early in all attorneys’ legal training, we hear the maxim, “cases are not authority for matters not considered therein.” Nowhere in the CCC v. Upland decision did the court say that a local initiative can avoid the two-thirds vote requirement for the imposition of a tax.

Nonetheless, there is troubling language in the decision that is contrary to well-settled principles of initiative law. Specifically, the court ruled that Proposition 218’s rules and procedures relating to voter approval of taxes expressly applied to local governments and thus the implication is that these rules and procedures do not apply to taxes imposed by voters via the initiative power. (Again, the rule at issue was the timing of the local election on marijuana dispensaries, not the two-thirds vote requirement.)

If, for some reason, the dicta (legalese for superfluous language) in the CCC v. Upland decision says what Prop 13 enemies say it does — and we don’t think it does — then the consequences would indeed be profound and dangerous. It would give local governments a huge incentive to collude with front groups to propose local initiatives which would purport to raise special taxes with a simple majority vote.

What the court did not cite — perhaps because none of the parties briefed the issue — were the host of cases that hold that the people’s power of initiative is coextensive with that of a legislative body. The Howard Jarvis Taxpayers Association has always argued in defense of the initiative power, saying that if the Legislature (or city council) can do it, so can the people via initiative. But the corollary to this principle is that if the Legislature can’t do something, then neither can the people via initiative. Therefore, because a local government entity may not impose a special tax with a two-thirds vote of the people, then neither can proponents impose a special tax with a simple majority vIf, for some reason, the dicta (legalese for superfluous language) in the CCC v. Upland decision says what Prop 13 enemies say it does — and we don’t think it does — then the consequences would indeed be profound and dangerous. It would give local governments a huge incentive to collude with front groups to propose local initiatives which would purport to raise special taxes with a simple majority.

While the tax-and-spend lobby may cheer this ruling and hope that the tax floodgates will open, we suspect that local government attorneys are quietly advising their clients to be careful about overreaching. They probably realize that this decision is simply inconsistent with existing law relating to initiatives. Moreover, if any local government or interest group attempted to rely on this case as justification for a pursuing a special tax with a simple majority vote, they know that they would quickly find themselves in front of a judge.
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Jon Coupal is president of the Howard Jarvis Taxpayers Association – California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.

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