California Politics: Should voters control tax increases?

The history of California politics is rich with battles over taxes — the sweeping cuts ushered in by Proposition 13, higher taxes on tobacco and the state’s wealthiest residents and efforts to earmark money for public schools.

Tax increase campaigns are usually a raucous mix of emotions and economics. And more often than not, the state’s voters will reject a tax increase unless they’re convinced it only affects someone else.

Several tax fights loom on the horizon in November, including proposals to impose new taxes on high-income earners that would fund pandemic response and climate change programs.

But the most consequential effort, should it qualify for the statewide ballot, isn’t about one tax but instead offers a sweeping revision to the California Constitution that would almost certainly make it harder to raise local and state taxes in the future.

Giving voters the final say on taxes and fees

In broad strokes, the proposal championed by well-funded business interests would leave the fate of a variety of tax increases up to voters. It would replace the current patchwork of rules governing how local and state taxes are increased. It would also redefine some existing fees — often used to cover the costs of a particular service — as taxes and make it harder for government officials to increase those too.

“We’re at a critical point in California,” said Rob Lapsley, president of the California Business Roundtable, an organization that represents many of the state’s largest companies. “You have a growing frustration, and what we think could even be a revolt, of the average family in California of what they have to pay and their perception that they’re not getting a return on services.”

On the state level, the plan would require a ballot measure to ratify any tax increase approved by the Legislature. In communities across the state where many tax increases already require voter approval, the proposal would raise the bar by stipulating those taxes must be approved by two-thirds of the voters casting ballots. (Statewide tax increases would require only a simple majority vote.)

Recent history shows how hard it is to get two-thirds of voters in a community to approve a new tax. An analysis by local government finance expert Michael Coleman shows that although 82% of simple majority tax proposals in California cities were approved by voters in November 2020, the success rate of those requiring a supermajority to pass was only 43%.

In reality, tax increases are rare at the state Capitol. But those that have happened — like the 2017 gas tax increase to fund transportation needs — would likely be rejected by voters. The business group’s ballot measure would also make a less obvious but important change: Voters would have to approve any legislative effort to cancel one of the scores of California’s permanent tax credits. That’s because rescinding a tax cut, under state law, is the same as imposing a tax increase on those who would have to pay more.

Labor and liberal activist groups have lined up to oppose the sweeping tax proposal, perhaps aided by the ballot measure’s title and summary issued by state Atty. Gen. Rob Bonta: “Limits Ability of Voters and State and Local Governments to Raise Revenues for Government Services.” On Tuesday, opponents said a majority of voters in their private poll rejected the ballot measure when reading the official description.

“Voters learned what they need to know from just the title and summary of this initiative,” said the group’s spokesman, Mike Roth, “that this measure undermines their rights to determine local priorities and raise money for vital services like public schools, fire and emergency response, public health, and services to support homeless residents.”

One interesting footnote: Lapsley credits former Gov. Jerry Brown for the idea. It was Brown, after all, who ran for a third term as governor in 2010 by promising that he would not raise taxes without going to voters. (It’s important to note Brown also prefaced that promise by noting that it was during a recession.)

“We looked at that and said, ‘How is that bad policy?’” said Lapsley.

Another $23 billion?

Perhaps it’s time to stop being surprised by the size of California’s tax revenue surplus.

Last week, the independent Legislative Analyst’s Office projected the cash windfall estimates in last month’s state budget plan from Gov. Gavin Newsom were already way off the mark.

“Currently, our best estimate is that there will be somewhere between $6 billion and $23 billion in unanticipated revenue,” the analysts wrote.

The estimate is a reflection of how each month’s tax revenue collections seem to be better than those from the month before. That said, it’s important to remember that much of that money probably comes with strings attached — most notably, the rules laid out under California’s constitutional limit on spending, approved by voters in 1979. Even so, it’s another reminder of how the last decade has completely rewritten the expectations game that comes with each year’s state budget negotiations.

Although the numbers look astonishing now, it’s unclear what the total will look like in late spring, after millions of Californians file their taxes. It’s possible that some of the early rush of cash was paid ahead of schedule. The analysts wrote that their best guess for the size of the new and unexpected cash bonanza is just under $15 billion.

A setback for the Common Sense Party

Backers of a new California political party will not, it appears, get a spot on the ballot for the June statewide primary.

Secretary of State Shirley Weber has notified leaders of the California Common Sense Party that the group has come up short in the number of voter registrations needed to become the state’s seventh officially recognized political party. As we noted earlier this month, the group’s leaders have hoped to enlist candidates for seats in the Legislature who would run on a party promise to seek pragmatic solutions to the state’s problems.

But it’s not entirely clear the effort is over. At issue is the standard that state elections officials applied, one that requires new political parties to collect voter registrations equal to a percentage of California’s registered electorate. Common Sense Party leaders believe that election law excludes the state’s “no party preference” voters from the calculation — and, if so, the threshold would be much lower than where Weber’s staff has placed it.

California politics lightning round

— California voters are open to the idea of creating a legal market for betting on college and professional sports, but fewer than half of those surveyed are sure of their support, according to a poll by the Institute of Governmental Studies at UC Berkeley and co-sponsored by the L.A. Times. It’s an unsettled finding that serves as a prelude to a multimillion-dollar political battle in November.

— The Berkeley/L.A. Times poll also found that nearly two-thirds of California voters, including a majority of parents, support mask and vaccine mandates in K-12 schools.

— Five leading candidates for mayor of Los Angeles squared off Tuesday, but the most stinging barbs of the debate were directed at a sixth candidate who didn’t attend: billionaire and civic activist Rick Caruso.

— Two prominent Latino Democrats are battling for a newly drawn Southern California congressional seat that could be among the state’s most contested intraparty battles.