Terry McAteer: The first big tax earthquake since Proposition 13 has occurred

In 1978, with the passage of Proposition 13, California experienced a political earthquake, setting the property tax rate at 1% of assessed valuation and imposing a two-thirds voter approval threshold for any future tax increases.

A major tremor also occurred last month with the State Court of Appeals ruling that initiative measures placed on the ballot by citizen groups are not bound to the two-thirds requirement and that a simple majority would suffice.

Governments have moaned for years that the two-thirds requirement is too high of a hurdle to reach; that it allows a minority of the voters to dictate to the majority of voters. Nevada County has had a few measures get to that magic 67% number: Nevada City’s Road Improvement Tax, Grass Valley’s Road Improvement Tax and the County Libraries Sales Tax Measure. Recent fire tax measures through individual fire districts, though, have met with defeat, oftentimes due to the high hurdle of getting two-thirds of taxpayers to agree to tax themselves.

The taxing door opened a bit in 2017 with the California Supreme Court’s “Upland” decision. Its ruling concerned a citizen-initiated ballot measure on taxing marijuana in that Southern California city.

Writing the 5-2 majority opinion, Supreme Court Justice Cuéllar stated, “Multiple provisions of the state constitution explicitly constrain the power of local governments to raise taxes. But we will not lightly apply such restrictions on local governments to voter initiatives.” The Justice implied that special purpose taxes placed before voters via signature-gathered initiatives may not be held to the two-thirds vote requirement for taxes sought by governments themselves.

With that, advocates of new taxes quickly turned to the initiative process, hoping that Cuéllar’s opinion would allow them to succeed with only simple-majority votes. Several tests of the theory emerged from the 2018 elections, but trial court judges differed sharply on whether they should be validated.

Finally, the First District of the California Court of Appeals ruled (3-0) that a voter initiative (Proposition C) in San Francisco, which imposed a business tax to support homeless services, was legal since a simple majority of voters supported the measure. The Court sided with the city’s argument that initiatives placed on the ballot by citizens only need a simple majority to pass while those placed by lawmakers need two-thirds to pass.

Laura Dougherty, a staff attorney with the Howard Jarvis Association (the parent organization of Proposition 13), said the organization “naturally” intends to appeal the case to the State Supreme Court.

“The voters who passed Proposition 13 never intended to create multiple voter approval margins, she said. “Constitutionally, two-thirds vote is necessary for any special tax.”

In fact, school bond measures have only a 55% voter approval threshold due to the passage of Proposition 39 in 2000, which began the erosion of Proposition 13. Local school districts (Grass Valley, Nevada Union and Sierra College) have taken advantage of that lower figure to pass bond measures in Nevada County since the enactment of Proposition 39.

Now the battle lines are set for a tax showdown at the State Supreme Court in San Francisco. Since the court’s Upland decision, the justices are now being asked to clarify their ruling and determine if citizen initiatives really only do need over 50 percent to be enacted. If so, you can be sure that local jurisdictions, including Nevada County, will rush to have citizen initiatives placed on the ballot to support fire suppression activity or homelessness.

It is interesting to deliberate on the fact that all other voter activities need a simple majority to be elected or pass ballot measures but tax measures allow a minority of voters to control the will of the majority. I’m not sure this concept passes muster or the smell test with the concept of true democracy.

Terry McAteer is a member of Editorial Board. His views are his own and do not represent the views of or its editorial board members. Contact him at [email protected]

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