Everything We Know About New Taxes Could Be Out the Window

Government UNVEILING THE UNSEEN

Everything We Thought We Knew About the Two-Thirds Voter Requirement Could Change if New Ruling Holds

Two elections attorneys and San Diego City Attorney Jan Goldsmith believe a new court ruling could upend every assumption about passing new taxes in California via the initiative process.

Fred Woocher is one of California’s premier elections attorneys.

Woocher said we were right to read a recent decision by the state Fourth District Court of Appeal to have massive implications statewide on the future of politics and public affairs. It effectively means that the long-held assumption that you need to get approval from two-thirds of voters to increase special taxes is wrong — at least if you put the increase on the ballot through a citizens’ initiative.

Woocher says it really is that big of a deal.

He also says the decision is terrible.

“I’m not a big fan of all these requirements for votes on taxes and super-majority thresholds, but I just think this decision is wrong and not going to last,” Woocher said Thursday.

Woocher said the judges could reconsider it, or the state Supreme Court could throw it out. Either way, he said, it’s a deeply flawed decision.

If it stands, however, it will fundamentally change the conversation about major projects like stadiums and convention centers and go even further — it may pave the way for more taxes to support teachers, police, other business interests or whatever a person or group with enough money might want to put on the ballot.

And it could provide the already lucrative signature-gathering industry yet more juice.

Jan Goldsmith, San Diego’s city attorney, told the Union-Tribune the case marked a turning point.

“There was a belief there was a two-thirds requirement and this changes that. There’s no question it’s a seminal case,” he said.

San Diegans may be most interested in the immediate implications the ruling might have on the push to raise hotel-room taxes for a stadium or convention center or convadium combo project.

But don’t understate how wide the implications of the decision reach.

Most tax increases are placed on the ballot by city councils and other government agencies. This could change that calculus. Two attempts to raise the hotel-room tax failed in 2004 — one of them got well over 50 percent of the vote, but did not reach the two-thirds threshold.

Now, the Chargers and, separately, supporters of the Citizens’ Plan might be able to raise the tax with a simple majority. The lawyer for the Citizens’ Plan, Jim Sutton, is another well-known elections attorney in the state.

He says the ruling clearly means either his or the Chargers’ initiatives could now be approved with a simple majority vote.

The issue involves Article 13C of the California Constitution, which lays out the simple requirement for special taxes (i.e., taxes that fund specific purposes, like a stadium or convention center).

“No local government may impose, extend, or increase any special tax unless and until that tax is submitted to the electorate and approved by a two-thirds vote. A special tax shall not be deemed to have been increased if it is imposed at a rate not higher than the maximum rate so approved,” the Constitution says.

The court ruling says that should be read specifically as the government imposing the tax.

The case, involving the city of Upland, had to do with a new fee on marijuana collectives. A collective wanted to put an initiative to voters that would legalize some dispensaries, and let the city charge them a $75,000 permit to open. There was a dispute about whether the city’s $75,000 permit for such facilities was a fee or a tax subject to the voting requirements of the Constitution.

“We need not reach the issue of whether the fee is a tax under Article 13C because, regardless, Article 13, section 2 does not apply to the Initiative. This is because Article 13C, section 2 is limited to taxes imposed by local government and is silent as to imposing a tax by initiative,” the court ruled.

The court went on to declare that all the statewide propositions that contributed to the long-standing assumption that two-thirds of voters had to sign off on all tax hikes did not intend to do that for citizen initiatives.

“Likewise, here, based on our review of Propositions 13, 218, and 26 as whole and taking into consideration the stated intent of these propositions (preventing government from imposing taxes without voter approval), we conclude the drafters, proponents, and voters of Propositions 13, 218 and 26 did not intend the language, “imposed by local government,” to encompass taxes imposed by initiative, but later collected or received by local government,” the ruling states.

Woocher said this was not an impressive ruling.

“I thought it would be a little more comprehensive given the sweeping impacts of the decision,” Woocher said.

To him, the Constitution is talking about a government imposing a tax – no matter how the ordinance or law that created the tax is originated.

“It doesn’t matter whether it was generated by ordinance or motion of a City Council member or by a citizen with an initiative who wanted it on the ballot, either way it is a tax and has to be voted upon according to the requirements of the Constitution,” he said.

The decision, though, has given supporters of a new convadium in San Diego a lift.

“Let’s be clear that when one or both of these measures appear on the November ballot, they will only need 50 percent plus one, not two-thirds, of the votes to become law,” Sutton wrote in an op-ed for us.

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