California May Have Just Made It Easier for Cities to Hike Taxes

A decision this week by California’s Supreme Court might make it easier for local governments to levy taxes.

Note the use of the word “might.”

A 5-2 opinion by the state’s Supreme Court yesterday throws the rules for ballot initiatives into confusion, suggesting initiatives put forth by private parties may require only a majority vote to pass, rather than the two-thirds California law required for decades for both private and city-led proposals.

It’s not entirely clear how far-reaching the court’s ruling is. But if the broadest interpretation is applied, the potential impacts are obvious and huge: Suddenly it’s a whole lot easier for private interests to get tax increases and new fees passed to take money from others for their own pet interests.

Jon Coupal, president of the Howard Jarvis Taxpayers Association, is already preparing for the worst, telling the San Diego Union-Tribune, “This is a significant decision that will lead to unbridled collusion between local governments and special interest groups.”

The state Supreme Court case involves a ballot initiative introduced by California Cannabis Coalition, a medical marijuana, in Upton. The group asked that the city’s ban on dispensaries be repealed. That sounds good, right? But it also introduced a permitting process and significant license and inspection fees. Protectionism via fees—that’s bad! Upton determined those fees triggered the two-thirds requirement. The marijuana group challenged that requirement in court.

It’s worth noting the ballot initiative failed to get even majority support, but the court decided to consider the underlying claim that these types of ballot initiatives should not be held to the two-thirds requirement.

There is a sense in the majority decision that because these ballot initiatives originate from “the people” rather than city governments, they should not be subject to the tougher threshold.

But, of course, “the people” do not regularly embark on massive quests to raise their neighbors’ taxes. “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. They’re no more neutral or “democratic” than those proposed by city leaders.

The most glaring example is that of publicly financed professional sports stadiums, the example news outlets point out when considering the possible consequences of this ruling. San Diego citizens were asked to vote to raise taxes just last fall to build a new stadium for the Chargers. They said no.

Often, city leaders and the private interests are on the same side in these kinds of cases. City leaders try to sell stadiums to citizens as economic development while sports team owners pocket the subsidies. These tax initiatives are not the result of some group of football fans organizing at tailgate parties. It’s cronyism. With the right marketing, this court ruling actually makes local corruption easier.

It’s also very easy to imagine public employee union groups using this mechanism to try to raise taxes and fees to fund their growing pension debt. Democratic State Sen. Scott Wiener says the change will make it easier for cities to more easily fund local schools and transportation needs. What we really see is that tax increases go right into the pension money pit and don’t actually fund improvements at all.

Judge Leondra R. Kruger noted in her dissent essentially that a tax doesn’t become more pure or democratic simply because it was levied via a voter initiative. It’s still taking money from citizens and giving it to the city: “A tax passed by voter initiative, no less than a tax passed by vote of the city council, is a tax of the local government, to be collected by the local government, to raise revenue for the local government.”

Coupal says he’s going to try to amend the state’s constitution to require a two-thirds vote for citizen initiatives concerning increasing taxes or creating new fees.

Given the state’s Democratically controlled legislature, he’ll probably have to bypass them with a citizen ballot initiative himself. Fortunately, he’ll only have to get a support from the majority of voters.