By Scott Kaufman, Legislative Director
This is the story of how the Howard Jarvis Taxpayers Association forced the Legislature into a near-unanimous vote to make it harder to raise taxes.
In the last weeks before the Legislature’s summer recess, the Howard Jarvis Taxpayers Association was heavily pressured by special interest groups and elected officials, including the governor’s office, to pull the Local Taxpayer Protection Act to Save Proposition 13 from the November ballot.
Many of our supporters in the business community received even more intense pressure, with demands that they stop helping HJTA’s campaign to pass the initiative. That led to the people concerned about transfer taxes cutting a separate deal for a transfer tax cap, introduced as Assembly Bill 736.
AB 736 was a terrible deal for taxpayers. It was not a constitutional amendment, so its caps on transfer taxes could be overridden with special legislation all the time, like the sales tax cap. And it did nothing at all about closing the “Upland” loophole, ambiguous language in the California Supreme Court’s 2017 California Cannabis Coalition v. City of Upland decision, which lower courts interpreted to allow special-interest-sponsored “citizens’ initiative tax increases” to evade the two-thirds vote requirement in Proposition 13.
HJTA was pressured to withdraw its initiative for AB 736 alone. But the problem with “Upland” taxes has been getting worse with every election, as more and more interest groups write their own tax increases, direct all the money to themselves, collect signatures to place them on the ballot and then enjoy a much lower vote threshold to pass them than the identical measure would require if placed on the ballot by a government body: 50%-plus-1 instead of 66.67%.
Closing the “Upland” loophole has been a top priority for HJTA for almost 10 years. We cannot save Prop. 13 without closing the “Upland” loophole. We can’t fix transfer taxes without closing the “Upland” loophole. So, despite the pressure to withdraw the initiative in exchange for a transfer tax cap, and threats to spend upwards of $10 million against us if we didn’t, HJTA said no deal.
Then, with just hours to go before the deadline to finalize the ballot, we won a tremendous victory for taxpayers. The governor’s office and the Legislature reversed their previous stance and offered their full support for the two-thirds vote requirement to pass local special taxes. They offered to pass a legislative constitutional amendment, Assembly Constitutional Amendment 22, that would close the “Upland” loophole once and for all.
But that wasn’t enough. We also insisted that the Legislature reverse its vote from 2023 that put a “poison pill” constitutional amendment, Assembly Constitutional Amendment 13, on the November ballot. ACA 13 would have required the Local Taxpayer Protection Act to Save Proposition 13 to meet an unusually high vote threshold to pass, potentially making it far more difficult to enact taxpayer protections through the initiative process, permanently.
The governor’s office and the Legislature agreed to our terms. Assembly Constitutional Amendment 21 was passed to remove the poison pill ACA 13 from the November ballot and clear the way for the Local Taxpayer Protection Act to Save Proposition 13 to be approved by a simple majority of voters instead of a more challenging vote threshold. The new measure is exclusively focused on restoring the two-thirds vote requirement for local special taxes in Proposition 13, after courts have eroded its protections.
That’s the deal to which HJTA agreed as a condition of withdrawing its original initiative.
In exchange, we deferred the fight over transfer taxes to another day, and we gave up the provision in the initiative that would have repealed, in two years, some existing transfer taxes and parcel taxes that court-created loopholes had already allowed.
On June 25, as the clock ticked down to the 5:00 p.m. deadline, the Assembly and the Senate voted almost unanimously to pass two Assembly Constitutional Amendments, ACA 21 and ACA 22, to put the revised Local Taxpayer Protection Act to Save Proposition 13 on the November ballot and take the poison pill ACA 13 off. HJTA was at the Secretary of State’s office to personally witness the measures being formally enrolled. When they could no longer be revoked, HJTA withdrew the original initiative.
As the legendary comedian W.C. Fields said, “Trust everybody, but cut the cards.”
After the 5:00 p.m. deadline, the Secretary of State officially certified all the November ballot measures. The Local Taxpayer Protection Act to Save Proposition 13 is now Proposition 43.
When voters approve it, all new local special taxes, those that earmark the revenue for specific purposes, will require a two-thirds vote of the people. This includes transfer taxes, sales taxes, business taxes and parcel taxes. There will no longer be an exception from the two-thirds vote requirement for any “citizens’ initiative tax increases” that were placed on the ballot by special interest groups collecting signatures.
The “Upland” loophole will finally be closed.