Last month, the Fourth District Court of Appeal issued an unexpected decision
that could blow a hole through the constitutional vote requirements that
protect Californians from unnecessary taxes.
If the decision is not reversed by the California Supreme Court or de-published, it could result in the people of California losing their right to vote on local taxes.
In California Cannabis Coalition v. City of Upland, the court wrongly stated that the right to vote on local tax initiatives is not a right guaranteed by California’s constitution. The court inexplicably claimed that the constitution’s vote requirements for local taxes apply only to taxes placed on the ballot by the government – not taxes proposed by a local initiative.
To put it another way, the court ruled that the constitution’s vote requirement for taxes doesn’t apply when the people collect signatures and seek to tax themselves – a ruling that flies in the face of decades of legal precedent, and is based on a strained new definition of the word “impose” in relation to who imposes taxes.
If allowed to stand, the Upland decision will create a massive loophole by effectively allowing local taxes to be imposed without any public vote at all.
State election laws provide that once the required signatures are submitted for a local initiative, the governing body of a city, county or special district (including school districts, fire districts and transit districts) has the option of adopting the initiative outright, or placing it on the ballot for the voters to decide. It has always been understood that this process applied to initiatives that do not include taxes, but that tax-related initiatives always must be presented to the voters, under the terms of at least three taxpayer protections added to the state constitution by the people. The new Court of Appeal decision scraps that understanding, and has some local governments thinking they can adopt tax-hiking initiatives without a public vote.
By allowing the circumvention of vote requirements, the ruling effectively creates an opportunity for local governments to conspire with special interests to raise your taxes. For example, rather than directly sponsor a tax increase, a school district could work with the spending lobby to gather signatures for a tax initiative. After gathering enough signatures – a relatively easy feat at the local level – the special interests would just submit their initiative to the district, and the district officials would vote to adopt it, right then and there – without any taxpayer vote. Abuse of the initiative process would become commonplace under the Upland ruling.
It’s no secret that California is an expensive place to live and do business. Can you image how much more costly it would be if local governments could increase taxes without a public vote? Constitutional vote requirements for local taxes are the main backstop taxpayers have to ensure that local governments do not pass unnecessary taxes.
If the Upland decision stands, it wouldn’t be the first time the courts have gutted taxpayer protections. In 1982, the California Supreme Court sparked a 30-year debate over the public’s right to vote on taxes. The court found in San Francisco v. Farrell that Proposition 13’s vote requirement applied only to taxes that raise revenue for specific programs. Thus, general taxes could be passed without a public vote.
It has taken three statewide propositions to clean up the court’s anti-taxpayer ruling, but time and again, the people have affirmed and reaffirmed their that they have a right to vote on local taxes – they did so with passage of Proposition 62 in 1986, Proposition 218 in 1996, and Proposition 26 in 2010.
The outcome of the Upland case is uncertain. It is unknown whether the city’s appeal to the California Supreme Court will be successful. But local governments have wasted no time in using the case to damage our constitutional protections. In at least one other local tax case, the League of California Cities has cited the Upland decision as precedent in a bid to approve no-vote taxes.
The Upland case is a call to action for taxpayers to unite and reaffirm our constitutional rights. As a sponsor of Proposition 26, the Stop Hidden Taxes Act, CalTax is defending taxpayers’ rights to ensure that Upland does not become legal precedent.
Mardiros “Marty” Dakessian is the founder of Dakessian Law, a firm dedicated to representing California taxpayers. Robert Gutierrez is director of the California Tax Foundation, which was established by CalTax in 1980 to educate taxpayers about sound tax policy.