The Great California Tax Battle of 2024 - Part 1
Elected officials and the Press are Gaslighting the Public Regarding the Taxpayer Protection and Government Accountability Act
The Taxpayer Protection and Government Accountability Act, a proposed amendment to the California Constitution, has qualified for the November 2024 ballot.1 Governor Gavin Newsom and the leadership of the California State Legislature have filed a writ petition in the California Supreme Court, seeking to block it from being placed on the ballot.2
On Wednesday, the Court agreed to hear arguments in the matter.
From journalistic reporting on this measure as well as the kvetching and gaslighting of numerous elected officials, one might gain an impression that this is a legally difficult case or that the Taxpayer Protection and Government Accountability Act is reasonably likely to get blocked by the Court.
However, I am still fairly confident that the Taxpayer Protection and Government Accountability Act will appear on the November 2024 ballot.3
I feel this way for two reasons. First, the excellent opposition brief filed by the California Business Roundtable explains how this ballot measure is fully constitutional.4 Second, the writ petition itself cites case law that precludes its very argument.
Unfortunately, there are many places where the news media is not covering this current tax battle comprehensively and numerous areas of the constitutional law where the general public and even many lawyers are not fully informed.
Often elected officials can make claims that are then repeated verbatim as truth by journalists or state something that is legally inaccurate to a journalist and not be challenged.
This is especially true of the Taxpayer Protection and Government Accountability Act and the upcoming 2024 tax battles in California.
This article will explain (1) what the Taxpayer Protection and Government Accountability Act will actually do if enacted, (2) the legal claims against it, and (3) how the Governor and Legislative Leadership’s own brief cited case law that conclusively demonstrates the law’s constitutionality.
I. What Does the Taxpayer Protection and Government Accountability Act Actually Do?
A good starting place to understand what this tax fight is about is to know what the Taxpayer Protection and Government Accountability Act will actually do if it is enacted next year. It is a fairly lengthy amendment so I summarize the changes here.
In shortest summary, the Taxpayer Protection and Government Accountability Act creates the following changes to the California Constitution:
New Requirements for Title and Summary of all Taxation Ballot Measures
This amendment will require that the title and summary of all ballot measures for any new taxes or tax increases must include (1) the amount or rate of the tax, (2) how long the tax will be in effect for, (3) the estimate of the annual amount expected to be derived from the tax, and (4) the expenditures that the tax revenue will actually be used for.New General Tax Disclosure Requirement
Any ballot measures for imposing or increasing new general taxes include a separate statement on the ballot that the tax is for “unrestricted general revenue purposes”.Legally Binding Ballot Titles and Summaries
Once enacted, the terms of tax initiatives as presented to voters will no longer be able to be surreptitiously changed. Once voters enact a tax for certain purposes, the revenues can no longer be redirected and used for something else the voters never approved of. Furthermore, there will be a legal right of action to enforce the terms of the ballot measure that enacted the tax.Uniform Process for Changing Taxes Approved by Electorate
This amendment establishes a mandatory electoral process for changing the use of pre-approved tax revenues passed at the ballot box. A legislative body will be required to vote to change the use of revenues and then submit the proposed change to the electorate.New Prohibition on Government Campaign Expenditures
This amendment adds a new article to the Constitution that prohibits the state from using public money for campaign expenditures to support the passage of tax initiatives they favor or oppose and creates a legal right of action against elected officials for violating this law.Prohibition on Taxation Advisory Votes
Jurisdictions will no longer be able to place advisory ballot initiatives on the ballot that ask where the proceeds of taxes should be directed to if the elected officials are given discretion.Electoral Approval for all New State Taxes
This amendment will require that all new taxes passed by the California Legislature must be approved by two thirds of the membership of both houses and then approved by a simple majority vote of the electorate. Currently, two thirds of the membership of both houses must vote in favor of any new or increased tax.5
While voters cannot technically use the referendum process on taxes, voters in California have the right to repeal an existing tax at the ballot box through use of a ballot initiative instead.6 Some argue this works to effectively function as a referendum on taxes.7 Because if an initiative can repeal a tax just imposed by the Legislature or other governing body, it functions as a referendum.8
Nevertheless, the right of voters to repeal local taxes has been expressly added to the Constitution.9 The Taxpayer Protection and Government Accountability Act codifies this right as it pertains to state taxes and ensures there is a majority signoff by the electorate on any new or increased taxes.Restatement of 2/3rds Majority Vote for Special Taxes
In California, all taxes are either general taxes or special taxes.10 General taxes require only a simple majority vote by the electorate for approval.11 Special taxes require a 2/3rds majority vote by the electorate for approval under existing constitutional and statutory provisions.12Californians voted for restrictions on special taxes in 1978, 1986, 1996, and 2010.13 However, there has been recent legal confusion as to when this threshold will apply ignoring the constitutional requirement of a 2/3rds vote. This amendment will ensure the 2/3rds requirement is applied uniformly.
New Definition for Taxes for Referendum Purposes
Californians have a right to repeal laws passed by the Legislature and local legislative bodies but the referendum power specifically excludes taxes.14 However, there is currently no definition of tax in that section and it creates costly litigation as well as confusion for the courts.15 This amendment will provide a definition of the term tax for referendums.
New Burden of Proof for Determining Whether Fees are Taxes
Currently, the government in California bears the burden of proof of proving that a fee they have enacted is not a tax.16The current burden of proof that the government must meet is the preponderance of the evidence standard. The Taxpayer Protection and Government Accountability Act will change the burden of proof to the stronger clear and convincing evidence legal standard.
Incorporating the Affordable Care Act
This amendment will add charges for personal healthcare services to the current list of exempt charge fees that the government can impose. Currently, there are seven types of exempt charges that local government may enact17 and five types of exempt charges that state government may enact.18 Healthcare service fees are not included.Incorporating Fees for Tourism Promotion
This amendment will add fees collected for the promotion of California tourism into additional exempt fees that the government may impose.Restriction on Taxes by Unelected Administrative Agencies
This amendment will clarify that taxes can only be imposed on the public by elected officials or through the initiative power of the voters, not by unelected agencies operating on their own. This is technically how government is supposed to work now.This provision expressly exempts the University of California system, California State University system, and the California Community College system
Codification of Existing Legal Doctrines for Determining What is a Tax
This amendment will codify the existing legal doctrine that how a tax or fee is labeled is not legally determinative of what kind of tax or fee it is.New Definition for Actual Cost
Currently, the term “actual cost” is used repeatedly throughout these constitutional provisions governing taxation. However, there is no definition provided. This amendment will add one.
“Actual cost” for the government providing a service or product will require that the cost is the minimum amount necessary to reimburse the government for the cost of providing the service or product to the person who receives it, lest any offsets to the government, and that the reimbursement amount is not used by the government for any other purpose besides reimbursing that cost.
Retroactivity. The Taxpayer Protection and Government Accountability Act does not apply to any current state taxes. Thus, it will have no revenue effect on existing state revenue. It will retroactively apply to any local taxes enacted prior to October 1, 2021. However, there will be a twelve month compliance period for local jurisdictions to re-enact taxes.
II. What are the Legal Issues in the Challenge Against the Taxpayer Protection and Government Accountability Act?
The writ petition alleges that (1) the Taxpayer Protection and Government Accountability Act is an impermissible revision of the California Constitution, and (2) that the Taxpayer Protection and Government Accountability Act will improperly impair the functioning of government. The writ petition does not raise any other legal arguments.19
I find the allegation that the Taxpayer Protection and Government Accountability Act is an impermissible revision fairly ironic as the Legislature has placed Assembly Constitutional Amendment 13 on the ballot in November 2024, designed to thwart the Taxpayer Protection and Government Accountability Act, which I argue is an impermissible revision of the California Constitution itself.20
In some ways, it reminds me of how a sociopath is often likely to wrongfully accuse others of wrongdoing that they themselves are engaged in.
Nevertheless, the arguments should be reviewed for the benefit of the public.
A. What is a Revision of the California Constitution?
The California Constitution provides that “All political power is inherent in the people. Government is instituted for their protection, security, and benefit, and they have the right to alter or reform it when the public good may require.”21 This provision “reflects a basic precept of our governmental system: that the people have the constitutional right to alter or reform their government.”22
These constitutional provisions were “[d]rafted in light of the theory that all power of government ultimately resides in the people, the amendment speaks of the initiative and referendum, not as a right granted to the people, but as a power reserved by them.”23 Thus, the right of Californians to submit ballot measures to the public “is a fundamental legislative power that the people may exercise through the initiative process.”24
California’s Constitution can be amended fairly easily, with every constitutional amendment, whether proposed through the citizen’s initiative process or by the State Legislature, needing only a bare majority of the votes cast at an election.25
There are two ways to amend the California Constitution:
A constitutional amendment may be proposed by two-thirds of both the California State Assembly and the California State Legislature.26
A constitutional amendment may be proposed by an initiative petition signed by a number of registered voters equaling no less than eight percent of the total numbers of votes cast for Governor in the last gubernatorial election.27
However, a constitutional amendment cannot be used to impermissibly revise the Constitution.28
A revision of the California Constitution can only occur if (1) two thirds of both the California State Assembly and California State Senate propose a constitutional convention, (2) a majority of voters agree to a constitutional convention, and (3) a majority of voters ratify whatever is agreed upon at that constitutional convention.29
While this doctrine of an impermissible revision exists, it is very rarely applied and there is a very high bar for applying the doctrine. In fact, the California Supreme Court has only ever held that a constitutional amendment constituted a revision on two occasions.30
And on one of those occasions, the proposed ballot measure, removed from the ballot pre-election, would have likely failed as a violation of the single subject rule, which did not yet exist.31 On the sole occasion that the Court struck down a constitutional amendment as an impermissible revision, it struck down only one part of a much larger and broader constitutional amendment, leaving everything else intact.32
B. Impermissible Impairment of Essential Government Functions
This rarely utilized legal doctrine has been invoked in the past against local initiatives.33 As the California Supreme Court has explained, “this principle serves to invalidate an initiative which, in limiting one governmental power, impairs or destroys the ability of government to exercise a different and more essential power.”34
However, there are two reasons why this claim is unlikely to succeed in invalidating the Taxpayer Protection and Government Accountability Act.
First, in order to prevail on this theory of law, it has to be shown that there is actual impairment inevitable in nature, not just speculative conjecture.35
There are no current state taxes impacted by this measure. Of those few local measures which may be impacted, they can be re-enacted. The government of California is functioning right now with its current revenue and spending. The allegations that this will impair government function are merely speculative, pointing to some day in the future when government might hypothetically shut down.
Second, it is uncertain that this doctrine applies to statewide initiatives.36 Moreover, even if it applied to statewide statutory initiatives, it is uncertain that it applies to constitutional amendments.37 The Court once assumed it did for the purposes of argument in evaluating a controversial 1980’s constitutional amendment restricting the rights of criminal defendants but rejected the argument.38
Interestingly though, in that same case, neither of the two Justices who authored dissents, Chief Justice Rose Bird and Justice Stanley Mosk, advanced the argument.39 And not because either Justice had any love for the enacted constitutional amendment.40 They very much thought it was unconstitutional. But the argument that it impaired essential services clearly did not persuade them.
In hindsight, it makes perfect sense why neither would embrace the theory that the Court could strike down a constitutional amendment on the basis that it impaired essential governmental functions.
If the Court were to ever do so, it would raise major separation of powers issues.41 Holding that a constitutional amendment could not be enforced, not because of a procedural defect or a violation of the federal constitution, but because it impaired government services amounts to a policy determination - a policy determination made by the Court.
The Court would essentially place itself above the democratically elected branches of government and declare itself the arbiter of what is ultimately good or bad for the people of California. And not just on constitutional amendments but on all duly enacted laws. The Court would have free reign to rewrite laws as it saw fit because it could make its own policy calls.
Here, Governor Newsom and the California State Legislature are asking the Court to do just that. They want the Court to decide that as a matter of public policy that the Taxpayer Protection and Government Accountability Act is a bad idea and therefore should not be enacted. Moreover, they want the Court to decide that it is such a bad idea that the voters should not even be allowed to debate the concept.
This mistakes the fundamental role of the judiciary. And dangerously so.
Making public policy determinations is not the role or the function of the judicial branch.42 Courts have the power to say what the law is, not to say what the law should be.43 Moreover, courts lack the capacity to engage in public policy making decisions regardless of how judges personally feel about laws in question.44 Those are functions that are left to the political branches of government.45
Although the Court may agree with Governor Newsom and the Legislative Leadership that the Taxpayer Protection and Government Accountability Act is a bad idea, the Court cannot simply throw out the law on that basis. In order to agree with this legal theory, it would have to abandon its longstanding role.
It is always possible this could occur but seems unlikely.
III. Governor Newsom and the Legislative Leadership Cited Authority in Their Own Writ Petition Precluding Their Entire Argument
Without going into too much detail, the entire basis of the writ petition is that there is an inherent legislative power to impose taxes that absolutely cannot be limited or taken away. This ignores that the power of the California State Legislature has been severely limited or taken away several times previously.
Although citing no actual cases in support, the brief goes on ad nauseum about the inherent legislative power that would be taken away by the Taxpayer Protection and Government Accountability Act.
However, in Footnote 21 on Page 43 of their own writ petition, they write “The Legislature has long been considered “supreme in the field of taxation,” such that its power to impose taxes “exists unless it has been expressly eliminated by the Constitution.” (The Gillette Co. v. Franchise Tax Bd. (2015) 62 Cal.4th 468, 477, citation omitted.)”
The omitted citation is Delaney v. Lowery, in which the California Supreme Court stated “Generally, the Legislature is supreme in the field of taxation, and the provisions on taxation in the state Constitution are a limitation on the power of the Legislature rather than a grant to it. [The Legislature’s] power in the field of taxation is limited only by constitutional restrictions.”46
In other words, the California Constitution can be amended to limit and take away the Legislature’s powers on taxation. The voters have as much right to amend the California Constitution as the State Legislature does.47
The writ petition also flatly contradicts its own arguments in claiming that a revision will occur because the Legislature will no longer be able to delegate taxation duties to administrative agencies. If something is an inherent legislative power under the Constitution, it cannot be constitutionally delegated away to other branches of government.48 Therefore, the argument they make falls on itself.
IV. Conclusion
Despite media reports to the contrary and the rhetoric of many elected officials, the Taxpayer Protection and Government Accountability Act is very likely constitutional.
https://oag.ca.gov/system/files/initiatives/pdfs/21-0026A1%20%28%26quot%3BThe%20Taxpayer%20Protection%20and%20Government%20Accountability%20Act%26quot%3B%29.pdf
https://www.courthousenews.com/california-tax-reform-bid-faces-resistance-from-lawmakers/
The author of this article is an attorney licensed to practice in the State of California and the District of Columbia. This article and all of the works on this Substack page are statements of the opinions of the author, only, and do not constitute legal advice; they are not intended to be relied upon by any individual or entity in any transaction or other legal matter, past, pending, or future. A paid subscription to this Substack page supports the author’s scholarship and provides access to research that the author has compiled, but does not establish an attorney-client relationship. The author does not accept unsolicited requests for legal advice or representation, and this Substack page is not intended as legal advertising. The opinions expressed on this Substack page reflect the personal views of the author only.
https://taxpayerprotection.com/wp-content/uploads/2023/10/TPA-Lawsuit-Response.pdf