Nineteenth century lawyer and newspaper publisher, Gideon J. Tucker, once said that “no man’s life, liberty or property are safe while the Legislature is in session.” Well, the California Legislature is back in session and no truer words have ever been spoken. And, while we’re still waiting on a thousand or so more bills to appear in print, there are already several major concerns to taxpayers, and even a few direct threats to Proposition 13.
Here are just two: ACA 1 and ACA 3.
Assembly Constitutional Amendment 1 is a perennial attack on Proposition 13. Year after year it is re-introduced and each time California taxpayers rise up and defeat it. Still, it’s a recurring threat that shouldn’t be taken lightly, and taxpayers need to remain vigilant. Bad bills pass all the time and we never know when some deal may be struck that sees ACA 1 sail through. That is especially true in this new legislative session, with a new crop of progressive representatives.
All Californians should be deeply concerned about ACA 1 because it would make it easier to raise taxes by lowering the voter approval requirement for local bonds and tax increases from the current two-thirds down to 55 percent if the money would be used for “public infrastructure” and certain types of public housing projects. Proposition 13 mandates a two-thirds voter approval for all special taxes, but ACA 1 would wipe out that protection for nearly all local taxes because the category of “infrastructure” is so vague that it covers almost anything.
In 2000, voters lowered the threshold needed to approve school bonds from two-thirds to 55 percent based on the promise that all California’s problems with education would be cured. How did that work out? California’s test scores are still at the bottom even as per-pupil spending skyrockets.
These are below-the-line exactions that are added to property tax bills above and beyond Prop. 13’s one percent cap. That’s why Prop. 13’s two-thirds vote requirements for all special taxes is so important.
Assembly Constitutional Amendment 3 would gut Proposition 13. It would allow the Legislature to raise taxes statewide with a simple majority vote of each house instead of the constitutionally required two-thirds vote established by Prop. 13. It would also allow the Legislature to define “wealth” to include unrealized capital gains in real estate, meaning the government would be empowered, by a simple majority vote, to create a new annual tax on the current market value of a home or other property.
While the “whereas” clauses in the preamble of ACA 3 recite talking points about rich people escaping taxation and that a new tax on “extreme wealth” will restore fairness to the state’s tax system, nothing in the measure, a proposed amendment of Article XIII, Section 2 of the California Constitution, limits the Legislature to taxing only rich people or “above-average” wealth.
Currently, Section 2 constitutionally limits its taxing authorization to “personal property” that is “tangible.” ACA 3 would remove both of those limits and would authorize “the taxation of all forms of … wealth, whether tangible or intangible.”
That means the Legislature could define “wealth” to include equity in real property that is not fully taxed through property taxes due to Proposition 13. The Legislature could also define “wealth” to include equity in investment securities, based on their current market value, which today would not be taxed until a capital gain is realized upon sale. Anyone who owns a home or has a retirement account is threatened by ACA 3.
ACA 3 also removes another important taxpayer protection known as the Gann Limit. This voter-approved limit on the growth of spending by state and local governments would be defined out of existence. The Gann Limit generally requires government entities to restrain their spending to conform to the growth of inflation and population. It was intended to prevent runaway government spending.
Don’t be fooled. Although proponents say ACA 3 is part of a new “wealth tax” on the super-rich, and its companion legislation, Assembly Bill 259, affects only the ultra-wealthy, ACA 3 contains no such limitation. The Legislature could easily move those brackets down to hit average California homeowners at any time – and if they can do it, sooner or later, they will.
Jon Coupal is president of the Howard Jarvis Taxpayers Association.
Since 1911, Californians have possessed powerful tools to control indolent or corrupt politicians. The rights of direct democracy — initiative, referendum and recall — are enshrined in the California Constitution for reasons that are just as compelling in 2023 as they were more than a century ago.
But make no mistake, politicians hate direct democracy and view it as a threat to their political power or, at a minimum, as an intrusion on their legislative responsibilities. It is no surprise, then, when legislators introduce proposals to weaken direct democracy, and this legislative session is no different.
Last month, progressive legislators introduced Senate Constitutional Amendment 1 to gut the recall power. Under current law, voters can recall a state officer by majority vote and, in the same election, elect a successor with a plurality of the vote. In addition, the state constitution prohibits a public official who is the subject of a recall election from being a candidate for successor.
In a fundamental change to the Constitution, SCA 1 would leave an office vacant in the event of a successful recall until a replacement is elected in a special election, or if there is insufficient time to hold a special election, the office would remain vacant for the remainder of the term. This deprives voters of knowing who might replace the officer they are recalling and creates a new concern that a public office could remain unfilled with no one to perform the duties of that office.
In addition, under SCA 1 the rules would be different for a gubernatorial recall. If a governor is removed from office in a recall election, the lieutenant governor becomes governor for the remainder of the unexpired term. In a one-party state like California, this renders a recall for governor nearly pointless.
If SCA 1 sounds familiar, it is nearly identical to SCA 3, which was introduced in the last legislative session but, fortunately, did not progress very far. Perhaps the reason the proposal stalled last year is the realization that, as a proposed constitutional amendment, it would have to be approved by a majority of the statewide electorate. Public polling reveals that Californians support direct democracy, including the right to bounce bad politicians.
Another threat to direct democracy is an effort by the municipal bond industry to obscure the true cost of tax hikes and bond measures.
Senate Bill 532, introduced by Sen. Scott Wiener, D-San Francisco, seeks to weaken two existing transparency bills, Assembly Bills 809 and 195 (by then-Assemblyman Jay Obernolte, 2015-2016), sponsored by the Howard Jarvis Taxpayers Association. Taken together these bills state that for all local tax and bond measures, the rate of the tax, its duration and the total amount of money to be raised are disclosed right on the ballot label. While SB 532 continues to include most of this information, for local bonds and tiered special taxes it relegates it off the ballot label and buries it in the separately mailed voter information guide. When confronting special taxes that will be on tax rolls for decades, it is imperative that voters have as much information as possible.
SB 532 is another example of déjà vu all over again as it is nearly identical to Senate Bill 268 from 2019. That bill actually passed through both houses of the California Legislature but, in response to a letter from HJTA, Gov. Newsom vetoed it. Municipalities need to be held accountable, and voters are entitled to have before them the information necessary to make an informed decision on proposed ballot measures that directly affect their pocketbooks. Our hope is that Gov. Newsom’s veto of a nearly identical bill signals to the Legislature that, when it comes to transparency at the ballot box, he stands with HJTA.
Jon Coupal is president of the Howard Jarvis Taxpayers Association.