They don’t call it Taxifornia for nothing. California is a national leader in overall tax burden on individuals and businesses. A 7.5% statewide sales tax, a 39-cent-per-gallon gasoline tax, some of the highest income taxes in the country, and a litany of other local, county, and state claims to California denizens’ money, apparently aren’t enough for several state legislators. A number of constitutional amendments have been proposed to reduce the current two-thirds-of-voters requirement necessary for local government to raise taxes and incur bond indebtedness to 55%. These bills represent just the latest effort by California legislators to undo the “taxpayer revolt” put in motion by Proposition 13.
In 1978 California voters approved Proposition 13, which requires a two-thirds vote threshold in each house of the legislature for a state tax increase, and requires the same threshold of voter approval for local special taxes. Most significantly, though, is Proposition 13’s limit on property taxes. Proposition 13 limited property taxes to 1% of the “full cash value” of the property. Local governments have subsequently generated parcel taxes; or taxes variously based not on the value of the property, but either on the size of the property or just a flat tax on property regardless of its size. Proposition 39 passed in 2000 reduced the two-thirds requirement to 55% for local school districts to pass bond measures to fund education projects (also known as taking on debt). Bonds represent yet another means of getting around the 1% property tax limit; “General Obligation” bonds allow for property tax rates above 1% in order to pay for the bonds. In other words, a reduced bond threshold also thereby reduces the threshold for raising property taxes.
California governments have generally had little problem increasing taxes and fees on Californians, while managing to get themselves hundreds of billions of dollars in debt (including “unfunded liabilities”). But apparently local governments need more money, and want to make it easier to do so. State Senators Carol Liu (D-La Canada Flintridge), Ellen Wolk (D-Davis), Ellen Corbett (D-East Bay), and Loni Hancock (D-Oakland) have proposed Senate Constitutional Amendments (SCA's), aimed at lowering the threshold necessary for tax increases and bond purchasing from the current 2/3 rate for special taxes to 55%. Special taxes are taxes that are meant to go to specific projects.
A summary of the Amendments:
- SCA 4 (Liu): allows local agencies to levy, extend, or increase special taxes at 55% vote for local transportation projects (passed Senate Committee on Governance and Finance)
- SCA 7 (Wolk): Lowers the vote threshold from two-thirds to 55 percent for cities, counties, or library districts to issue bonds (e.g. take on debt) or to levy special taxes (passed Senate Committee on Governance and Finance and Committee on Elections and Constitutional Amendments)
- SCA 8 (Corbett): reduces the voter threshold from two-thirds to 55 percent for passage of local sales taxes dedicated to transportation purposes. (A scheduled July 9th hearing was canceled by the author of the bill, for unspecified reasons; passed Senate Committee on Governance and Finance)
- SCA 9 (Corbett): allows local agencies to levy, extend, or increase special taxes at 55% vote for community and economic development projects (passed Senate Committee on Governance and Finance and Committee on Elections and Constitutional Amendments)
- SCA 11: allows local agencies to levy, extend, or increase special taxes at 55% for any purpose (passed Senate Committee on Governance and Finance and Committee on Elections and Constitutional Amendments)
Another, SCA 3 proposed by Senator Mark Leno (D-San Francisco), was amended to remove language that would allow local education agencies to levy parcel taxes at a 55% threshold. SCA 3 was subsequently morphed into a bill to guarantee a right of the public to obtain government documents; following a failed effort by the State Senate to make public records compliance for local governments “optional” in a budget trailer bill revised after media scrutiny.
Most notable of all, though, is Assembly Constitutional Amendment 8, proposed by Assemblymember Bob Blumenfield (D-San Fernando Valley). ACA 8, if passed, would allow local government to reduce the voting threshold from two-thirds to 55% to pass bond measures for various infrastructure projects as General Obligation bonds. Given that General Obligation bonds result in higher property taxes, ACA 8 would make it easier for local governments to raise taxes. According to the Howard Jarvis Taxpayer Association, ACA 8 is a “direct assault on Prop 13” and would ultimately enable local government to incur significant debt at the expense of taxpayers, especially property owners.
What makes ACA 8 most notable though, is how it was passed. Without public hearings or debate, it was scheduled for a vote just before the California Assembly went on summer break. It passed 54-25. ACA 8 is now awaiting Senate action.
The Senate bills, referred to by the California Chamber of Commerce as “job killers,” still await public hearings. With state and local governments in California spending a combined $400 billion a year, and a political culture seemingly predicted on the notion that government can and should do more, it remains to be seen whether or not California voters will be able to defend themselves from higher tax burdens this time.