Democrats know that should their majority vote budget get signed into law, it’s going to be challenged in court and probably on the ballot. 

The Howard Jarvis Taxpayers Association has already announced it will sue. 

They’ll need to take a look at the state constitution first. 

A good starting point is Article XIII A, a section of the constitution that should be familiar to the group since its namesake helped add it to the constitution as 1978’s Proposition 13. 

The landmark measure is famous for limiting annual property tax increases to 1 percent but it does other things, too. 

In Section 3, the association’s lawyers will find the following: 

“Any changes in state taxes enacted for the purpose of increasing revenues collected pursuant thereto whether by increased rates or change in methods of computation must be imposed by an act passed by not less than two-thirds of all members elected to each of the two houses of the Legislature.” 

What the Democrats do in their plan is eliminate the sales tax on gasoline and an 18 cent per gallon excise tax and replace it with a mix of other tax increases.  Among those increase is a three-quarter cent boost in sales tax, a 2.5 percent personal income tax “surcharge” and a 9.9 percent tax on oil extraction. 

By cutting gasoline taxes and replacing it with a like amount of other taxes Democrats contend their measure is “revenue neutral.” 

In their view, trading one kind of tax for another but maintaining the same level of taxation does not “raise” revenue so the vote requirement of Article XIII A’s Section 3 doesn’t apply. All that’s needed is a majority vote. 

A majority vote for revenue-neutral bills has been accepted as legislative custom and practice for many years on federal tax conformity issues. Federal changes increasing taxes are balanced with those reducing taxes so the net result creates no change in the level of taxation. 

Jarvis et al will still argue that despite its alleged revenue neutrality the measure is still for the purpose of raising revenue and therefore should be subject to the super-majority vote. 

However, before filing a court challenge, attention should be paid to Article XIII’s Section 32: 

“No legal or equitable process shall issue in any proceeding in any court against this state or any officer thereof to prevent or enjoin the collection of any tax.” 

In other words, a lawsuit can be filed but Californians are going to be paying the taxes until an appellate body renders a decision. If the tax is found to be illegal an action to recover the tax paid –with interest – can be undertaken, Section 32 concludes. 

Perhaps rather than go through a tortuous court challenge, opponents of the tax levy want to nullify it by placing a referendum on the ballot.  See Article II, Section 9: 

“The referendum is the power of the electors to approve or reject statutes or parts of statutes EXCEPT urgency statutes, statutes calling elections and statutes providing for tax levies or appropriations for usual current expenses of the state.” 

(Editor’s Note: Emphasis is California’s Capitol.) 

Article II’s Section 8, which deals with initiatives, has no such restrictive language. Past court rulings have upheld the right to use an initiative to repeal a tax. 

Voters approved one such measure, Proposition 163, in 1992 to rescind the 1991 extension of the sales tax to candy and snack foods — a move backed by lawmakers as a way to solve another massive cash shortfall. 

The Howard Jarvis Taxpayers Association should be familiar with Proposition 163 since its membership roster was used by the initiative’s backers to raise seed money for their campaign. 

Unlike a referendum, an initiative doesn’t stop the taxes being collected when it qualifies for the ballot – only when voters approve it.  

The other big revenue raiser in the Democrats’ proposal is a 39-cent “user fee” on a gallon of gasoline. Total excise taxes on gasoline now are 36 cents, basically half of it state-imposed and half federal. 

This revenue will be used for transit and highway projects as well as improvements to local street and road improvements.

A court challenge could be made that the fee is actually a tax. Under the law, there must be some nexus between the entity paying the fee and the purpose it’s used for. 

The famous – or infamous in the eyes of the business community – court case in this area involves Sinclair Paint which had a fee imposed on it that was, in turn, used to support government programs to help limit the exposure to children of lead, which Sinclair’s paint contained. 

Courts found there was a nexus and backers of the Democratic budget plan will argue that the nexus between drivers paying for improvements to the highways they utilize is far stronger than charging a paint company to help keep children away from lead. 

In addition, a lawsuit contending the fee is a tax carries an additional procedural burden because the collection of tax can’t be enjoined. So the plaintiff must first ask the court to stop the fee from being collected and then seek to have the fee declared a tax. 

There is no restriction on running a referendum on the gasoline fees. If the referendum qualified, it would immediately halt collection of the fees until voters decide its fate in the next general election. 

Logistically, though, a referendum is tougher to do. It must be submitted with the proper number of signatures within 90 days of the enactment of the law it seeks to overturn. Initiatives have 150 days to turn in signatures. 

A further complication is that it’s likely a goodly portion of the business community would oppose either an initiative or a referendum on the gasoline fees because it would halt highway improvements, which create jobs and improve the economy. 

Finally, whatever legal issues are raised in a challenge on the taxes or fees or both is going wind up in the laps of the California Supreme Court, a body keenly aware of the nexus between a solvent state budget and a solvent judicial branch. 

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A Special Guest Editorial to California’s Capitol

By Gus Turdlock 

The hole is just getting bigger, now get rid of your shovels.   It’s time to get on with it. 

I pay a lot of money to the state each month in personal income taxes.  But I’m willing to pay more, assuming everyone joins me, to end this monumental standoff in the state Capitol. 

But, along the way, do some things to make sure this situation doesn’t happen again.  Or at least greatly reduce the chances of it occurring again. 

Look at history.  New state taxes were actually imposed on Californians during the Great Depression.  Republican Governors Reagan and Wilson increased taxes.   And we got by. 

What we are doing in scouring the budget for cuts ispitting programs against programs, groups against groups, Republicans against Democrats. The end result is that much of what made California what it istoday is threatened a sour the services that many of our residents depend on. 

This is just not the state Legislature’s problem.  Itis our problem.  And it’s time to deal with it.  Go ahead,make my day, tax me!

(Editor’s Note: As Mr. Turdlock points out, income tax was created in California during the Depression. It was also 15 percent at the time. The highest bracket is now 9.3 percent. Both the sales tax and bank and corporations taxes, the two other legs of the state’s revenue-stream stool, are also Depression babies.

(P.S. Looks like you may get your wish.)

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Ignoring criticism from economic experts and the Legislative Analyst’s Office, the California Air Resources Board has unanimously adopted a plan to create the country’s most aggressive assault on greenhouse gas emissions.

(Editor’s Note: See post below for more information.)

News Item: State of California Faces $28 billion Revenue Shortfall Absent Corrective Action, Legislative Analyst reports. 

Lawmakers came to Sacramento December 4, took their oaths of office, followed by celebratory lunches or gatherings then blew town. 

But they did take action: They introduced 90-some bills, resolutions and constitutional amendments. 

In the Senate, it’s new leader, Darrell Steinberg, placed the first measure across the desk of the upper house’s 2009-2010 session: A spot bill declaring the Legislature’s intent to offer universal health care for California’s kids. 

Estimates are generally in agreement that doing so would cost $400 million, which the state doesn’t have. 

None of the legislation would do anything to help close the $28 billion chasm between existing spending commitments and expected cash. A few would worsen teh state’s fiscal health.

An Assembly Republican placed a constitutional amendment across the desk to require every piece of legislation with a price tag of over $150,000 to be voted on by a two-thirds vote. Having already been in the Legislature for two years one would think he might be aware of the suspense file in his house’s Appropriations Committee. 

The second constitutional amendment in the Assembly would let persons who are 17 but will be 18 by the time an election comes around to be able to vote. 

Another Assembly constitutional amendment authored by a Republican – that means it will have a very short legislative life – would require any initiative that authorize the sale of more than $1 billion in bonds to either raise taxes or fees or cut state programs to cover the new costs. 

There’s a resolution proposing that Californians vote on whether to call constitutional convention.

The third Assembly bill would require the Public Utilities Commission to create by January 1, 2011 a Renewable Energy Workforce Readiness Program “to ensure green collar career placement and advancement opportunities with California’s renewable energy manufacturing, construction, installation, maintenance and operation sectors that is targeted towards specific populations.” 

And then send along a report to the Legislature how well it works by January 1 2012. 

The fifth Assembly bill would tell a person how to obtain discovery – in the legal sense – of electronically stored information, as defined. Based on the measure’s length it appears to a retread of something the GOP vetoed last year. 

The sixth Assembly bill declares the Legislature’s intent to have paid petition gatherers register as lobbyists. 

Allow cities and counties to impound for not more than 30 days a vehicle involved in prostitution. 

Authorize a city council to leave a seat on the council vacant for up to one year or until the next general election, whichever comes first, if the other remaining city council members can’t agree on whom to appoint to the empty seat. 

Assembly Bill 19 is the Carbon Labeling Act of 2009. The state air board would be required to “develop and implement a program for the voluntary assessment, verification and standardized labeling of the carbon footprint, as defined, of consumer products sold in California.  

Restrict the use of methyl bromide says AB 21. Increase the amount of damage required to make a person guilty of aggravated arson from $5.65 million asks AB 27. 

Confer honorary degrees on persons who didn’t graduate from CSU, UC or community college because they were sent to internment camps in World War II. 

AB 42 requires Pacific Gas & electric to use the state Energy Commission to conduct a “three dimensional imaging survey to map the fault characteristics in the vicinity of the Diablo Canyon Nuclear Power Plant that could potentially disrupt the reliable operation of the electrical grid and impact consumer rates as a result of a seismic event.” 

AB 43 would double from 25 to 50 the civil service employees the California Earthquake Authority can hire. 

There’s a tax credit proposed in AB 47 that would boost the credit for adoption expenses from 50 percent of up to $2,500 to 75 percent of $5,000 if the child is over age 12 or living in a group home when adopted. 

Reduce urban per capita water use by 20 percent by the end of 2020, says AB 49. 

That’s just the Assembly on just December 1. 

The second Senate bill introduced extends the life of the Pierce’s Disease Control Program in the Department of Food and Agriculture from March 1, 2016.

SB 4 nixes smoking on state beaches or in state parks.  SB 5 would “expressly include officers of the Monterey Peninsula Airport District among those reserve officers who are considered peace officers.” 

Senate Constitutional Amendment 2 requires the Legislature, starting in 2010, to deal with only the budget in odd-numbered years and introduce other legislation in even-numbered years. It’s carried by a Republican. 

SB 13 would reduce, starting in January, reduce all marginal tax rates and eliminate the tax on taxable income for tax years beginning with 2013. Another GOP bill. 

State Highway 680, between the Benicia Bridge in Contra Costa County and the State Highway 24 interchange would be named after former state Sen. Dan Boatwright under Senate Concurrent Resolution 4. 

SB 21 would require the Department of Fish and Game and the Ocean protection Council to recommend to the Fish and Game Commission by January 1, 2011 “sustainable funding sources” for a “program for the prevention of the loss of fishing gear and for the recovery of derelict fishing gear, as defined.”  

Like the signs next to freeway construction say: “Your tax dollars at work.” 

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