The measure, known as the “Tax Fairness, Transparency and Accountability Act of 2018,” and crafted by the California Business Roundtable, would require any new tax to be approved by two-thirds of both governing bodies and voters, would reclassify certain service fees as taxes, and would require any vote on a new tax to be consolidated with a regularly scheduled general election.
Proponents of the measure say that Californians are already subject to some of the highest taxes in the country, paying among the highest tax rates in the nation for state income tax, sales taxes, and gas taxes.
“For too long, politicians, state and local governments, and special interests have promised that taxpayer money will be spent for a specific purpose, only to divert its use once the money starts coming in,” the measure states.
The measure’s stated purpose is “that government remain accountable to the voters for how the taxes, fees, charges, and other government revenues extracted from California are spent… (and) ensure that taxpayers have the right and ability to effectively balance new or increased taxes, fees charges, or other government revenues with the rapidly increasing costs Californians are already paying for housing, food, gasoline, energy, healthcare, education, and other basic costs of living.”
Should the measure obtain enough signatures to be placed on the November ballot and ultimately pass, the result could be disastrous for local municipalities, and would create a “clear and present danger to local control over city and county revenues throughout California,” city officials said in a staff report.
“This initiative, by requiring all taxes to be subject to a two-thirds vote, would redefine ‘tax’ in California by eliminating the current distinction between general and special taxes with their respective vote thresholds, and would expand the definition to include payments voluntarily made in exchange for a benefit received,” the staff report said.
“The Act also amends the portion of the law defining exempt charges, i.e., charges not subject to the heightened vote requirement, in a way that could lead to legal challenges to not merely new taxes but to any new local fee where the amount of that fee exceeds the ‘actual’ cost to the local government of providing the service or product. This is because current law specifies that the amount of the fee cannot exceed the ‘reasonable’ cost to the local government so the proposed changes represents a much more exacting standard.”
That language could create issues with development agreements – which the city has used as method of generating revenue for, among other things, cannabis projects. Under the proposed measure, every levy, charge or exaction of any kind imposed, adopted, created or established by state law is either a tax or an exempt charge.
“I think a lot of people don’t know how this law, if it passes, would roll out,” said Ryan Jones, city attorney. “I think our annual fees would be fine, but it could effect the development agreements, which covers a percentage of gross revenues and a square footage. But I think we will initially take the position that it is a contract outside the new law. That’s a little bit different than what this measure contemplates.”
In a city where local general taxes have struggled to even garner 50 percent of the electorate’s vote under the current law, officials are worried they will be unable to pass any new taxes if this ballot measure passes.
“Well, based upon our last tax measure that we sent off – it failed – just based upon that, if this passed, I think it would be impossible for any new taxes to pass,” City Manager Jesse Cain said.
In 2016, the City Council voted to put Measure A on the November ballot, which was a sales tax increase of three-quarters of one percent. As general tax, it required a simple majority vote from the city electorate; the revenues from it would have gone into the city’s general fund, and could’ve been used to fund any municipal expense. Despite city officials warning that Measure A’s failure could mean reduced services residents, the measure failed by a wide margin: More than 59 percent of the electorate voted against the sales tax increase.
“If this law passes, that would make it virtually impossible,” Cain said. ■