By Tim A. Bittle, Director of Legal Affairs
If you want to know whether the traveling impressionist art exhibit will stop in your town, what should you do? Follow the Monet. (I made up that joke. If you didn’t like it, send your comments to info@HJTA.org.)
Seriously, though, if you want to know whether a tax is living up to the campaign promises made to voters, what should you do? Follow the money.
Measure ULA, a citizens’ initiative that appeared on the 2022 ballot in the City of Los Angeles, was pitched to voters as a “mansion tax” that would generate billions for affordable housing and homeless programs. Voters, frustrated with growing homeless encampments and their own high rents, enacted the measure into law. With over two years of data now available, it’s clear that the measure’s proponents deceived the voters.
First, the tax is not limited to mansions. It applies to all types of real property. Besides the statutory tax collected by every city on sales of real property, Measure ULA imposed an additional tax on sales inside the City of Los Angeles — a 4% tax on sales valued at $5 million up to $10 million ($40 per $1,000), jumping to 5.5% on sales of $10 million or more ($55 per $1,000). With annual inflation adjustments, the value thresholds increased to $5.3 million and $10.6 million as of July 1, 2025.
Second, the measure does not tax only profits. The tax is applied to the full sale price. If the seller’s profit is low or nonexistent, the ULA tax can seize all of the seller’s equity and transfer it to the government. In fact, the seller may need to withdraw additional money from the family savings account to pay the tax.
That’s what happened to Los Angeles Dodgers first baseman Freddie Freeman. Because of the downturn in the market, he sold his house in Los Angeles for less than he originally paid. Adding insult to injury, however, he had to pay a $2 million ULA tax to the City because the tax applies to the sale price, not to profit.
Third, the tax has not generated the billions promised to voters. Measure ULA took a robust real estate market and drove it into a tailspin. Developers are not building. Owners with a choice choose not to sell. And owners who have no choice resort to creative gimmicks that transfer control of property without recording a sale above the tax threshold.
Fourth, and most reproachable, of the revenue that has been received by the City, only 1% has been spent on affordable housing or homeless programs. The City kept its hands on the other 99%.
The Howard Jarvis Taxpayers Association sued to challenge Measure ULA when it first passed. I will explain the basis of our lawsuit, then I will let you know how the courts have ruled and where we stand today.
Our lawsuit is based on section 450(a) of the Los Angeles City Charter. A city charter is the “constitution of the city.” It is settled law that any ordinance in conflict with the charter is void.
Charter section 450(a) is titled “Subject of Initiative.” It is one sentence. It states: “Any proposed ordinance which the Council itself might adopt may be submitted to the Council by a petition filed with the City Clerk, requesting that the ordinance be adopted by the Council or be submitted to a vote of the electors of the City.”
The operative phrase — “which the Council itself might adopt” — has limited the subject of initiatives in the Los Angeles Charter since 1911, the year the initiative power was first reserved by state and local voters.
By limiting citizens’ initiatives to ordinances “which the Council itself might adopt,” section 450(a) prevents the City Council from hijacking the people’s initiative power in order to circumvent constitutional boundaries on the Council’s power. In other words, even if city politicians act as private citizens, they can propose by initiative only an “ordinance which the Council itself might adopt.”
Article XIII A, section 4, of the California Constitution, part of Proposition 13, provides, “Cities, Counties and special districts, by a two-thirds vote of the qualified electors of such district, may impose special taxes on such district, except...a transaction tax or sales tax on the sale of real property within such City, County or special district.”
Measure ULA is a transaction tax on the sale of real property. It is undisputed, therefore, that article XIII A, section 4, would prohibit the Los Angeles City Council from enacting Measure ULA.
Our lawsuit argues that, if the City Council is constitutionally prohibited from enacting a special transfer tax, then Charter section 450(a) prohibits the voters from enacting such a tax as well, because the voters are limited to “any proposed ordinance which the Council itself might adopt.”
What seems plain to us, however, cannot be seen by the courts. At least so far. The trial court ruled against us. We appealed and the Court of Appeal affirmed the trial court. In the words of the Court of Appeal, neither Charter section 450(a) nor article XIII A, section 4, of the state constitution stand as an impediment to the “unconstrained” power of local voters to enact an ordinance via initiative.
The decision of the Court of Appeal, championing Measure ULA because it was enacted by voters, makes no sense since voter approval is common to all of the laws at issue. Article XIII A, section 4 (prohibiting special transfer taxes), was the product of a voter-approved statewide initiative. Charter section 450 (limiting initiatives to ordinances that the Council could adopt) was also enacted by voters.
In the hierarchy of the law, an ordinance must yield to the city charter, and the state constitution is above them both. Yet the decision below illogically elevates an ordinance, Measure ULA, to the top.
By holding that local voters have “unconstrained” legislative power, the Court of Appeal has gifted not only Los Angeles politicians, but politicians in other cities — including general law cities — an opportunity to impose taxes they never had before.
Prior to the decision in this case in the lower court, charter cities had no authority to impose special transfer taxes, and general law cities had no authority to impose transfer taxes of any kind. Now, by acting as private citizens, both charter and general law City Councils will be able to impose general and special transfer taxes of any amount, and without an election!
How can they impose transfer taxes without an election, you ask? The Elections Code regulates what City Councils must do when they receive an initiative petition with enough signatures to qualify for the ballot (10% of registered voters). The Council must call an election and submit the initiative to the voters or enact the initiative itself without an election.
By choosing the second option, the Council can pass a new tax that had the support of only 10% of the registered voters.
We believe the Court of Appeal erred and that such a seismic shift in the law relating to local taxing powers should not occur without the oversight of California’s highest court. That is why we filed a Petition for Review with the California Supreme Court, which unfortunately was denied.
This means the Court of Appeal decision is the final word of the courts, but it’s not the final word on the issue. The Local Taxpayer Protection Act to Save Proposition 13 (the initiative proposed by the Howard Jarvis Taxpayers Association) would repeal Measure ULA, and all excessive real estate transfer taxes in California, two years after the measure is approved by voters. ¨