California has been losing businesses and residents to states with lower tax burdens for years, and the response in Sacramento has been puzzling. Rather than trying to compete with those states, the counter has been to instead raise taxes even higher.
Following this formula, legislators are kicking around Assembly Constitutional Amendment 1, a proposal that would undermine the protections of 1978’s Proposition 13. Should ACA 1 become law, it would lower the two-thirds voter-approval requirement of Proposition 13 for passing special local tax hikes to only 55%.
The threshold was strengthened in 1996 when voters approved Proposition 218, a constitutional amendment that requires a two-thirds vote for special taxes.
The bill set off dueling news conferences at the State Capitol. Republicans argued that ACA 1 “wrongly chips away at critical taxpayer protections by making it easier for greedy politicians and special interests to raise taxes,” and “will penalize hard-working Californians by making it easier to increase taxes.”
Democrats said the amendment “is targeted to the urgent needs of local communities,” and is needed so they “could propose local bonds or special taxes for community infrastructure and affordable housing projects.”
In another front in the tax policy war, Legislative Democrats proposed ACA 13 in response to a low-tax campaign launched by a business coalition that sponsored the Taxpayer Protection and Government Accountability Act.
If the business coalition measure, which has qualified for next year’s ballot, is passed by voters, legislatively proposed state tax increases would require approval by two-thirds of each house of the Legislature and a majority of voters. It would increase the vote requirement for local taxes to a two-thirds vote of the electorate.
The measure attempts to overcome a lower court ruling making it easier for local politicians to raise taxes. While keeping in place the two-thirds majority needed for local governments to put tax hikes before the voters, the court said citizen initiatives proposing tax increases need only a simple majority for approval.
ACA 13 would require that any ballot measure that changes voter thresholds must be approved by the same margin.
At the same time Sacramento is debating ACA 1 and ACA 13, lawmakers are talking about adding “more than $203.7 billion in new taxes and fees” to the current burden, according to the California Tax Foundation.
The largest chunk of that, $162.8 billion, would be needed to fund a statewide government-run single-payer health care program. A proposed wealth tax, which would apply to both current and former residents, would take another $22.3 billion out of the private economy. The controversial corporate tax increase would cost $7.2 billion. Other revenues would be generated by a steeper vehicle tax, additional health care fees, higher smog inspection fees, and a number of other levies, all adding up to more than $200 billion.
California decided some time ago it would be a high-tax state. It’s reached the point — long past it, really — at which it needs to decide if that status is sustainable. The state has been losing businesses for years, and for the first time in its history more residents are now leaving than are moving in and being born. It’s an easily understandable message.
The question is, will the message ever penetrate the halls of government? Most days it seems it never will. But there are groups and individuals out there dedicated to the low-tax cause, and they are as active as they ever were. Like Howard Jarvis, who worked for tax relief for years before Prop. 13 was passed, they know they have to be in it for the long haul.
Kerry Jackson is a fellow with the Center for California Reform at the Pacific Research Institute.