Regular readers of this column undoubtedly know what Proposition 13 is, but they may not know it does more than set property taxes at 1% of the home’s market value with a 2% cap on annual increases. It also imposed certain vote requirements for other kinds of taxes, including a requirement that local special taxes receive a two-thirds vote of the electorate and a state tax increase proposed by the California Legislature receive a two-thirds vote of each house.
Government hates these constraints on taking other people’s money, so they constantly try to find ways around them — and they have. In the early 80’s, they hit upon “benefit assessment districts,” which historically had been used legitimately to fund capital improvements that directly benefited property. But over time, bureaucrats began imposing assessments for general municipal services rendering them indistinguishable from property taxes. The sole reason for this transformation was to avoid Prop. 13’s voter approval requirements.
That’s why the Howard Jarvis Taxpayer Association put Proposition 218 on the ballot in 1996. It gave the people the right to vote on all local taxes and required taxpayer (or ratepayer) approval of assessments and property related fees. But just like when you squeeze a water balloon too hard, it tends to pop out somewhere else, so it is with government avoiding clear voter intent. That’s why state business associations and HJTA are supporting the Taxpayer Protection and Government Accountability Act initiative to close some new loopholes recent court rulings have opened in Props. 13 and 218.
While the initiative is still waiting for a circulating title and summary from the attorney general, the fiscal analysis by the nonpartisan Legislative Analyst’s Office was released last week and it’s instructive in explaining the tangled web of taxes our government weaves.
For perspective, the LAO notes that this year’s budget spends $255 billion and that over 90 percent of it is revenue from taxes. (Year over year increases in tax revenue and public spending have far outstripped population and inflation for decades). The LAO gives us some examples of where this comes from, like “sales taxes paid on goods and income taxes paid on wages and other sources of income.” The rest is from fees and other charges like “charges relating to regulatory activities; charges for specific government services or products, like fees charged to drivers to improve roads; charges for entering state property, such as a state park; and judicial fines, penalties, and other charges.”
At the local level, the largest tax paid is on property. Property taxes raise “roughly $75 billion annually.” Other taxes include “sales taxes, utility taxes, and hotel taxes.” Then come the levy of fees and other charges like “parking meter fees, building permit fees, regulatory fees, and judicial fines and penalties.”
These are not exhaustive lists, but you get the point. Government nickel-and-dimes you anywhere it can, and while Propositions 13 and 218 provide powerful protections, nothing is absolute.
The LAO notes that when it comes to fees, local governments and the state Legislature can also “delegate their authority to adjust fees and other charges to administrative entities,” such as city and state departments. There, “charges can be increased or changed by the department within certain limits.” For example, a true “fee” should not exceed the “reasonable” cost of providing a service, but that’s more theory than reality as local governments pad their general funds by charging excessive fees.
The newest wrinkle is the ever-leftward tilt of our court system and the move away from the plain language of the law—what it actually says—to what judicial activists would prefer the law say. As the LAO notes, “[r]ecent case law suggests that citizen initiative special taxes may be approved by majority vote, rather than a two-thirds vote.”
That’s upending nearly 50 years of court precedent and the clear intent of the voters. Closing this one loophole alone is a big reason why the Taxpayer Protection and Government Accountability Act initiative, like Prop. 13 and 218 before it, is necessary.
Jon Coupal is president of the Howard Jarvis Taxpayers Association.