The state’s Supreme Court will hear arguments in a case this week that could determine whether Californians are allowed to weigh in on an expansive ballot measure that would put virtually all tax increases before voters.
It’s part of a rare case in which the court will consider removing a proposition from the ballot before an election. At issue is whether the sweeping ballot measure, known by its supporters as the “Taxpayer Protection and Government Accountability Act,” is a constitutional amendment or a constitutional revision.
The business-backed initiative would mandate that voters sign off on all new tax increases, both at the state and local level. If approved by voters, the initiative would also reclassify many government fees as taxes and require any tax increase enacted since 2022 to comply with the new requirements.
A heavy-hitting coalition of Democratic officials and public labor leaders – from Gov. Gavin Newsom to teacher and firefighter unions – are asking the state’s highest court to remove the measure from the November ballot. They argue the ballot initiative is too broad to be considered a constitutional amendment, but is instead a constitutional revision.
While voters can propose amendments to state law and the constitution through ballot measures, only the legislature can propose broader constitutional revisions.
Business and taxpayer advocates submitted more than 1 million signatures in late 2022 to place the measure on the ballot.
Its backers say the measure is an attempt to rein in what they describe as runaway spending by California’s Democratic leaders and make the state more business-friendly.
“California is the highest-cost state in the country and every employer knows it,” said Robert Lapsley, president of the California Business Roundtable, a lead proponent of the initiative. “It’s our job to try and create balance in those policies or try and change those policies in a major way by appealing directly to voters.”
What the Taxpayer Protection Act would do
At its core, the Taxpayer Protection Act is designed to make it harder to raise taxes in California.
The measure would require voters to sign off on any new statewide tax or tax increase — in addition to an existing requirement that any tax increase be approved by a two-thirds majority in the legislature. And for certain local taxes, the measure would raise the necessary threshold for voter approval from a simple majority to a two-thirds majority.
It also contains provisions to reclassify many fees as taxes, and to nullify recent taxes that don’t meet its requirements.
State and local officials have raised alarm at how those provisions could impact governments’ ability to raise taxes to provide services, particularly during crises such as natural disasters, economic downturns or a pandemic.
Newsom spokesperson Erin Mellon has said that while the governor is “not a proponent of tax increases,” the measure would “effectively block the state’s ability to quickly respond to major challenges.” She noted the state temporarily raised taxes after the 2008 Great Recession to avoid further slashing funding for education and social services.
Former Gov. Jerry Brown and three former leaders of the state Department of Finance have filed court briefs in support of Newsom and the legislature’s attempt to take the measure off the November ballot. The former finance leaders wrote that the measure “would drastically impair the Legislature’s ability to perform the essential government function—and a Constitutionally required duty—to approve a balanced budget” if lawmakers are not able to raise revenue without seeking voter approval.
By reclassifying many government fees as taxes, the initiative would require voters to sign off not just on broad tax increases, but proposals to raise fees including parking rates (as recently proposed by Sacramento’s city manager), trash collection or other service charges. Local officials warn that waiting for an election would significantly delay a city or county’s ability to raise revenue for even basic services, and that ballots could include dozens of questions asking voters to weigh in on various funding proposals if the initiative is approved.
“Is someone going to want to vote for a parking meter rate? That’s the level of how expansive this measure is,” said Ben Triffo, a lobbyist with the League of California Cities. He said if approved, it would “decimate critical services,” from cities’ trash collection and street paving to staffing 911 emergency services.
“At the end of the day, if you don’t have necessary tax revenue or fee revenue, you’re going to have to backfill from other sources or you’re going to have to make cuts,” he said.
The Taxpayer Protection Act would also retroactively nullify tax increases approved since 2022 that do not meet the proposed requirements. It provides a one-year look-back period for local governments to remedy new taxes and fees.
That could impact a fairly new “mansion tax” in Los Angeles, which charges sellers a 4% land transfer fee if their property goes for more than $5 million. Property sales above $10 million are subject to a 5.5% fee, with all revenue earmarked for affordable housing and renter protections.
The tax, which has been criticized as dampening the city’s luxury real estate market (including on the Netflix series “Selling Sunset”), was approved by 58% of Los Angeles voters in 2022. But if the Taxpayer Protection Act is approved by voters, the “mansion tax” would be forced back to the ballot.
“They’re going to have to go back because of our look-back provision to get a two-thirds vote on that, instead of the majority vote that it received, in order for it to continue to move forward,” Lapsley said.
The League of Cities estimates roughly $2 billion in municipal revenue around California could be lost under the look-back provision if the funds are not re-approved by voters.
When is a constitutional amendment actually a constitutional revision?
The main argument posed by opponents of the measure is that it’s too broad to be considered a constitutional amendment.
In court documents filed last fall, lawyers for Newsom and the legislature argued the proposal is “unlike any measure that has ever gone before the voters with respect to the sweeping changes it would make to California’s fundamental governmental structure, the foundational powers of its branches, and the government’s ability to provide the essential government functions required by a functioning state.”
Supporters of the initiative argue in court documents that it “merely amends existing sections of the constitution.”
The California Supreme Court has invalidated ballot measures after ruling them illegal constitutional revisions at least twice before: In 1948, the court removed a massive ballot measure that dealt with various topics and would have repealed or amended 15 of the 25 articles of the state constitution at the time. The case preceded and helped give rise to a later rule that ballot measures deal with a single issue. The court also struck down part of a 1990 ballot measure it deemed an unlawful constitutional revision, but only after voters weighed in and approved it.
Otherwise, the state’s highest court has often defended California’s citizen initiative and referendum process as “one of the most precious rights of our democratic process” and has maintained it a “duty of the courts to jealously guard this right of the people.”
Backers of the Taxpayer Protection Act point out that the landmark Proposition 13, which limits property tax increases, faced a similar pre-election challenge in 1978. At the time, the California Supreme Court allowed it to stay on the ballot.
Lapsley with the California Business Roundtable acknowledged there was a “different court makeup” in 1978, but said he is “confident” the court would let the current measure remain on the ballot.
“They would be setting a massive precedent if they take us off the ballot,” he said. “Let me be clear about this: if they do that, then we are a one-party state from top to bottom, with no independent judiciary whatsoever. That is going to be the message that business takes away across the country.”
Do other states require voter sign-off on taxes?
Proponents of the measure said it’s modeled after Colorado’s “Taxpayer’s Bill of Rights,” a 1992 law that requires voter sign-off on any new taxes. The law was amended in 2020 to require voter approval of new fees or fee increases. It also mandates the state refund surplus revenue to taxpayers, among other restrictions.
The law, known as TABOR, has led to tax refunds for Coloradans over the years, but has often “gummed things up” for lawmakers trying to balance a budget, said Richard Auxier, a researcher with the nonpartisan Tax Policy Center.
“When you’re in the middle of a recession, delays [in raising revenue] could then lead to job losses and a worse economic situation,” he said. “We always want voters to be part of the process but the reason we have representative legislatures is so they can act on these things and then adjust to fast-moving situations.”
Many states, including those with Republicans in charge, only require supermajority votes from legislators to impose new taxes, Auxier said. That rule already applies in California.
He described the measure less as a good-government initiative but as “just politics. This is one side setting the rules that would be most advantageous to their side, not rules that would necessarily be advantageous to public policy.”
The state’s highest court will hear oral arguments in the case May 8 in San Francisco. Both sides have asked for a decision before June 27, which is the deadline for the Secretary of State to certify California’s general election ballot.