Court Ruling Paves the Way for Even More Tax Hikes in Overtaxed California

Court Ruling Paves the Way for Even More Tax Hikes in Overtaxed California

Tax hikes, especially in the state known for its extraordinarily heavy tax burden, should not be easily enacted. Yet the California Supreme Court has made the job much easier.

California law previously required a two-thirds majority for the passage of any tax hike introduced by government or by a voter initiative, thanks to Propositions 13 and 218. That important protection was stripped away on Aug. 28 when the court ruled 5-2 that voter initiatives need only a simple majority to raise taxes.

We can imagine the mental wheels that have been spinning in Sacramento and in the halls of local governments since the decision was handed down. Tax hikes that lawmakers have long wanted to enact but couldn’t because of the two-thirds requirement suddenly have greater possibility.

While the court’s ruling did not directly lower the bar for governments to raise taxes, it did in fact do just that. Jon Coupal, president of the Howard Jarvis Taxpayers Association, says now “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.”

Assemblywoman Catharine Baker (R-San Ramon) said that “this ruling empowers special interest groups who want your money for pet projects to do an end-around on taxpayer protections.”

Don’t think this won’t happen. Reason Foundation’s Scott Shackford notes that “‘citizen’ initiatives that increase taxes or introduce fees are frequently introduced and pushed by those who would stand to benefit from the revenue that’s brought in.” Those who “stand to benefit” include public employee union groups that would employ “this mechanism to try to raise taxes and fees to fund their growing pension debt.”

Taxes are already difficult in this state. Research from the California Taxpayers Association says that this state has the highest sales tax in the nation, the highest personal income tax in the nation, the seventh-highest gasoline tax, the highest corporate tax in the western U.S., and property taxes that are the 22nd highest in the country despite the limitations placed on them by Prop 13. Now the almost unimaginable is possible — the burden can become even more extreme.

In the dissenting opinion Associate Justice Leondra R. Kruger – a Brown appointee – pointed out that a voter initiative carries no special weight because citizens are directly involved. It is merely another way of enacting legislation.

“When a city’s voters exercise the power of initiative, they do not act merely as members of the public, but as legislators; in this capacity, their power to legislate is generally co-extensive with the legislative power of the local governing body.”

Assembly Republicans responded quickly to the ruling, proposing a constitutional amendment they believe will prevent the tax burden from growing worse. The amendment would “require all local tax increases for a special purpose to receive approval from two-thirds of voters.” Their plan is to have it on the ballot of the June 2018 election. If so, they could head off the tax hike initiatives that special interests will be trying to rush before voters.

Kerry Jackson is a fellow with the Center for California Reform at the Pacific Research Institute.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.