The Great California Tax Battle of 2024 - Part 3

Key Takeaways From Yesterday's Oral Arguments Before the California Supreme Court Over Whether to Remove the Taxpayer Protection and Government Accountability Act From the November Ballot

Yesterday, the California Supreme Court heard oral arguments over the legal challenge of Governor Gavin Newsom and the California State Legislature to the Taxpayer Protection and Government Accountability Act (the “TPGA”),¹ a constitutional ballot initiative that has qualified for the November 2024 ballot.²

While I won’t predict how the Court will rule (always a dangerous game to play), after yesterday’s oral arguments, I still think it is highly unlikely that the California Supreme Court will remove the TPGA from the ballot.³

Oral arguments before the California Supreme Court are often more revealing than those before the United States Supreme Court because the Justices are required to issue an opinion within ninety (90) days of oral argument.⁴ Thus, by the time of oral arguments, the Justices have largely made up their minds and decisions are often already drafted.

The legal issues regarding the constitutionality of the TPGA are likely confusing to the public. To break it down, there are two different issues:

1. Will the California Supreme Court order the TPGA removed from the ballot?

2. If the California Supreme Court allows the TPGA to remain on the ballot and it then passes in November, will it or any individual part of it be struck down as unconstitutional?

It is exceedingly rare that a ballot measure is removed from the ballot before it is voted on at an election. The number of times that the California Supreme Court has removed a ballot measure from the ballot can be counted on two hands.⁵

The Court has made clear that constitutional challenges to ballot measures should occur only after the measure has been submitted to the electorate and passed at the ballot box.⁶

There’s a good reason for this. The Court doesn’t want to be issuing advisory opinions on matters that are at best hypotheticals. In a pre-election challenge to the validity of a ballot measure, what the Court is considering is a law or policy that doesn’t yet exist. The Court also wants to protect the constitutional right of citizen’s initiatives.⁷ Blocking them from the ballot defeats this purpose.

When a ballot measure is removed from the ballot before an election, it is because the measure is either clearly unconstitutional or it failed to meet the procedural requirements.⁸

For example, someone qualifies a ballot measure that proposes the death penalty for all gay people and all Jewish people. Being patently unconstitutional, that would be suitable for a court to order off the ballot.

Or, the Secretary of State certifies a ballot measure even though it hasn’t received the required number of signatures.⁹ Having been certified for the ballot despite having failed to meet the signature requirements for qualifying a ballot initiative, that would be suitable for a court to order off the ballot.

There is no argument that the TPGA is procedurally defective. Instead, Governor Newsom and the State Legislature are arguing that the TPGA, a proposed constitutional amendment, is an impermissible revision to the California State Constitution.

To understand this argument, a review of how the amendment process to the California Constitution is helpful.

There are two ways to amend the California Constitution:

1. A constitutional amendment may be proposed by two-thirds of both the California State Assembly and the California State Legislature.¹⁰

2. 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.¹¹

Once the constitutional amendment is placed on the ballot, if it earns a majority of the votes cast on the question at the next election (50%+1), it is adopted and becomes law.¹² The TPGA is the latter type of constitutional amendment.

While it is relatively easy to amend the California Constitution, a constitutional amendment may not be used to improperly revise the Constitution.¹³ And constitutional amendments that attempt to impermissibly revise the California Constitution will be struck down.¹⁴

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.¹⁵

Here is the problem for Governor Newsom and the State Legislature in trying to remove the TPGA from the ballot. While it is exceedingly rare that the California Court will remove a ballot initiative from the ballot before an election, it is even rarer for the California Supreme Court to hold that a constitutional amendment is an impermissible revision.

While many of California’s more controversial ballot measures amending the state constitution have been challenged as improper revisions, only two constitutional amendments - one proposed ballot initiative qualified for the ballot and one passed by the voters - have ever been held to be impermissible revisions.¹⁶

In order to persuade the Court to remove the TPGA from the ballot, Governor Newsom and the State Legislature would have to convince the Court that it was so clearly a revision to the California Constitution that the Court had to remove it.

At yesterday’s oral arguments, it did not seem like the Court was persuaded to take that step.

A few key takeaways:

Takeaway #1: None of the Justices Seemed Persuaded That the TPGA Would Cause Irreparable Damage if Passed

The lawyer for Governor Newsom and the State Legislature pointed out financial uncertainty that would be caused for local jurisdictions if the TPGA passed given that the TPGA has a three year retroactivity provision where taxes passed in violation of it would be invalid and have to be re-submitted to the voters. If cities don’t know whether these taxes can continue, she argued, they face financial uncertainty.

Both Justice Marvin Jenkins and Justice Kelli Evans, both appointments of Governor Gavin Newsom, noted that if the Court litigated the constitutionality of the TPGA, that would pause the implementation of the period.

Takeaway #2: None of the Justices Seemed to Think the TPGA was so Clearly and Patently Unconstitutional That it Needed to be Removed From the Ballot

Chief Justice Patricia Guerrero, who seemed to express the most concern over the potential financial effects and governance effects of the TPGA, interrupted the lawyer for Governor Newsom and the State Legislature, less than a minute into her opening argument to ask her about whether the Court could decide the case. She, like the other Justices, seemed skeptical of the answer.

Takeaway #3: The Justices Appear Confused About What Governor Newsom and the State Legislature Were Actually Arguing and his Lawyer Failed to Answer

When asked repeatedly by Justices, the lawyer for Governor Newsom and the State Legislature could not identify the type of impermissible revision she was asking the Court to hold that the TPGA was. Let me explain why that is significant.

There are two different types of impermissible revision:

1. A quantitative revision

2. A qualitative revision

What’s the difference?

A quantitative revision is when a constitutional amendment is so large and voluminous and affects so many different constitutional provisions that it would be akin to writing an entirely new state constitution.¹⁷

A qualitative revision is when a constitutional amendment, even a single sentence, has such a profound impact that it changes the fundamental governing structure of California.¹⁸

Let’s look at the real life examples. In 1948, when the Court removed a constitutional amendment ballot initiative from the ballot, that constitutional article consisted of 12 separate sections, divided into 208 separate subsections that accounted for more than 21,000 words.¹⁹

What did all these articles consist of?

A simple listing of the titles and a truncated summary of each of the measure's sections provides a flavor of the varied nature and wide breadth of the proposal. Section I, entitled “Principles and Policy,” stated that it may be cited as “the ‘California Bill of Rights’” and contained “declarations of various ethical, economic and governmental concepts and philosophies.” Section II, entitled “The California Pension Commission,” named the first five commissioners to serve on the commission and established their salaries. Section III, entitled “Retirement Pension Payments,” specified pension benefits to be paid by the government to various categories of individuals. Section IV, entitled “Wagering and Gaming,” contained 50 subsections related to that subject. Section V, entitled “Taxes,” contained 16 subsections related to various types of taxes and tax exemptions. Section VI, entitled “Oleomargarine,” provided that oleomargarine could not be sold in California without a license and without payment of a tax or fee. Section VII, entitled “Pertaining to the Healing Arts,” contained 53 sections, creating a “California State Board of Naturopathic Examiners” to supplement the existing medical boards and granting to that board—whose first members were specifically named—extensive authority. Section VIII, entitled “Civic Centers,” declared there to be a civic center at every public school building within the state, and granted every nonprofit and nonsectarian organization in the state formed for “‘political, economic, educational, or moral activities’” the right to use such a civic center without charge or fee. Section IX, entitled “Legislature, Elections, Committees,” contained three subsections, which (1) provided for reapportionment of the state senate, (2) prohibited cross-filing at primary elections, and (3) regulated the selection of legislative committees. Section X, entitled “Fish, Game, Public Lands and Waters,” contained five subsections regulating public lands and inland waters of the state and granting various powers to the Fish and Game Commission. Section XI, entitled “Surface Mining,” contained nine subsections regulating surface mining in the state, including provisions for the issuance of operating permits and for the imposition of penalties for violation of the regulations. The final section, section XII, entitled “General,” contained nine subsections, providing, among other things, for the repeal of any portion of the existing Constitution which “‘is in conflict with any of the provisions of this article’” and further specifying that “‘[n]o injunction or writ of mandate, or other legal equitable process, shall ever issue or be maintained to interfere with the effectiveness or operation of this article … .’”²⁰

In removing it from the ballot, the Court basically said, in the words of gay Instagram/Tik Tok star and fashion model A.J. Sanchez, “y’all are doing too much.”²¹ Granted, this would today be a violation of the single subject rule, but in 1948 was a quantitative revision because it was akin to voting on a brand new state constitution.²²

In 1990, voters passed a far reaching constitutional amendment to reign in criminal offenders, Proposition 115.²³ Proposition 115’s purpose was to restrict constitutional rights of criminal defendants; it toughened criminal sentences and removed rights from criminal defendants.²⁴

Proposition 115 contained two sentences that it added to the Constitution:

In criminal cases the rights of a defendant to equal protection of the laws, to due process of law, to the assistance of counsel, to be personally present with counsel, to a speedy and public trial, to compel the attendance of witnesses, to confront the witnesses against him or her, to be free from unreasonable searches and seizures, to privacy, to not be compelled to be a witness against himself or herself, to not be placed twice in jeopardy for the same offense, and to not suffer the imposition of cruel or unusual punishment, shall be construed by the courts of this State in a manner consistent with the Constitution of the United States. This Constitution shall not be construed by the courts to afford greater rights to criminal defendants than those afforded by the Constitution of the United States, nor shall it be construed to afford greater rights to minors in juvenile proceedings on criminal causes than those afforded by the Constitution of the United States.²⁵

Effectively, these two sentences took away the power of the California Supreme Court to interpret constitutional criminal procedure rights in any way that was different from the United States Supreme Court.²⁶ The Court held that this constituted an impermissible qualitative revision because it fundamentally changed the structure of government in California.²⁷

Why does it matter whether Governor Newsom and the State Legislature are challenging the TPGA as a quantitative revision or a qualitative revision?

In order to determine whether the TPGA should be removed from the ballot, the Court has to assume that the TPGA is passed by the voters.

If the TPGA itself is a quantitative revision, then it is invalid in its entirety and all of it must be struck down. That would be the case even if there are provisions within it that are ultimately constitutionally valid. Therefore, if it is a quantitative revision, it would need to be removed from the ballot. And indeed, Governor Newsom and the State Legislature are asking the Court to do that.

However, if only some parts of the TPGA were qualitative revisions, then just those portions of it would be struck down if challenged and the rest of the TPGA would remain intact.²⁸ If that is the case, then removing the entire TPGA from the ballot seems extreme and absurd. Those parts that do not impermissibly revise the Constitution should be voted on.

At oral arguments, the lawyer for the government conceded to Justice Goodwin Liu that in fact, many of the provisions of the TPGA could be passed on their own and would be constitutional. That effectively defeats the entire argument for removing it from the ballot.

Takeaway #4: Only One Justice Appeared to be Open to the Arguments Regarding the Legislature’s Core Fundamental Power to Tax

Governor Newsom and the State Legislature are arguing that the power to tax is such a fundamental part of the Legislature’s role that it cannot be changed by constitutional amendment. Yet, that contradicts pre-existing precedents.

As held by the California Supreme Court, “the legislative power in California is shared by the Legislature and the electorate acting through its powers of initiative and referendum, not exclusively exercised by the Legislature.”²⁹ “Under our constitutional system the Legislature is not the exclusive source of legislative power.”³⁰

Moreover, “language in the California Constitution establishing the authority of “the Legislature” to legislate in a particular area must reasonably be interpreted to include, rather than to preclude, the right of the people through the initiative process to exercise similar legislative authority.”³¹ After all, it is the Court’s “solemn duty to jealously guard the precious initiative power, and to resolve any reasonable doubts in favor of its exercise.”³²

The Legislature’s power to legislate in taxation is supreme unless limited by constitutional amendment.³³ The Legislature’s “power in the field of taxation is limited only by constitutional restrictions.”³⁴

The argument that Governor Newsom and the State Legislature appear to be making is that somehow, taxation is some sort of core fundamental power that can never be taken away.

Observing yesterday’s oral arguments, only Justice Goodwin Liu appeared to have any interest in entertaining the argument that somehow taxation was such a fundamental part of the State Legislature’s role that it could not be taken away by the voters.

However, this would require the Court to abandon all of its historical precedent and create a new precedent that would throw a lot of existing constitutional amendments into question.

Governor Newsom and the State Legislature would likely tell you that the Legislature’s power to tax has never been taken away before, just as they tell us that California was a slave state.

However, neither claim is accurate. And even their lawyer admitted as much at oral arguments.

Has the taxation power of the State Legislature ever been diminished or taken away before?

Yes.

1. Appropriating the Proceeds of Local Taxes. The State Legislature can no longer restrict or appropriate proceeds of local taxes imposed by local government.³⁵ This restriction was passed by the voters in 2010 as a citizen initiated constitutional amendment.³⁶

2. Imposing Local Taxes for Local Purposes. The State Legislature is constitutionally restricted from imposing local taxes for local government purposes even though it is allowed to authorize local jurisdictions to impose local taxes.³⁷

3. Property Taxes. The State Legislature cannot impose any property taxes on real estate that are higher than 1% a year, any new property taxes, or sales or transaction taxes on the sale of real property.³⁸ These restrictions were passed by the voters in 1978 as a citizen initiated constitutional amendment, the infamous Proposition 13.³⁹ Proposition 13 was upheld as constitutional against a challenge that it constituted an impermissible revision.⁴⁰

4. New State Taxes. The California State Legislature currently cannot impose any new taxes without a 2/3rds vote of its membership.⁴¹ These restrictions were also passed by the voters in 1978 as a citizen initiated constitutional amendment, the infamous Proposition 13.⁴² Although challenged as an impermissible revision, Proposition 13 was not an impermissible revision to the California Constitution.⁴³

5. Food Taxes. The State Legislature can no longer impose new food taxes on the sale of foodstuffs in California.⁴⁴ This constitutional amendment was passed by the voters in 1992 as a citizen initiated constitutional amendment.⁴⁵

6. Other Taxation Limitations.

   1. The California State Legislature cannot change tax sharing agreements between counties without submitting it to a vote.⁴⁶

   2. The California State Legislature cannot change the hospital provider tax without submitting it to a vote.⁴⁷

   3. If a statutory tax program has been passed by the electorate, it cannot be changed by the Legislature unless it is sent back to the voters.⁴⁸ Or it can be changed by the State Legislature but only pursuant to the instructions of the statute.⁴⁹ Those instructions will be carefully adhered to by the courts, which will strike down laws attempting to change voter passed initiatives.⁵⁰

There are other problems with this newfound theory that taxation is a fundamental power of the State Legislature that cannot be diminished or taken away. There’s no definition of core fundamental power in the Constitution. And it begs the question.

What constitutes a core fundamental power of a state legislature?

For example, isn’t it a core fundamental power of a state legislature to:

• Set its own members’ salaries?

• Define pensions for its elected members?

• Draw the boundaries of its legislative districts as well as the state’s Congressional Districts?

• Establish its own legislative office staff budget?

• Make determinations about how much it can spend in its own state budget?

• Build public housing projects?

In California, however:

• The power to set annual member salaries has been taken away from the State Legislature and placed with an independent citizen’s commission.⁵¹

• Members of the California State Legislature are prohibited from receiving pensions for their service.⁵²

• The power to draw legislative districts and Congressional districts has been taken away from the State Legislature and given to an independent citizen’s commission.⁵³

• The State Legislature has had its discretion over its total office staff budget taken away and capped by constitutional amendment.⁵⁴

• The State Legislature is subject to what is known as the Gann Limit that limits its amount of discretionary spending.⁵⁵

• Public housing projects require the majority voter approval wherever the public housing is to be built.⁵⁶ (Not to get off topic but in case anyone is wondering, nearly all of these required public housing referendums pass, usually overwhelmingly, including in extremely wealthy and exclusive jurisdictions where affordable housing is seen as a benefit to the community).

There are also other problems with this newfound theory. The California Constitution explicitly does not allow the referendum power for taxation measures.⁵⁷ It seems that if taxation was such a core fundamental power of the State Legislature as to be beyond initiative power, it would have been mentioned.

It’s why that while the referendum cannot be used for tax measures, voters can use the initiative power to repeal existing taxes.⁵⁸ Some might argue that it’s the same damn thing.⁵⁹ Nevertheless, it’s the existing power and right of California voters. And it seems odd to say that Californians cannot amend their Constitution to require votes on future taxes.

I wouldn’t predict how Justice Liu would rule based solely on his line of questioning. He’s a brilliant judge and known as a deep thinker. He is going to delve deeply into these complex constitutional issues in oral argument. The fact that he is open to the arguments doesn’t mean he has necessarily accepted them.

Takeaway #5: Justice Carol Corrigan Didn’t Ask a Single Question

One key observation of yesterday’s oral arguments it that Justice Carol Corrigan did not ask a single question.

This is significant for two reasons.

First, it likely means that whatever the case outcome currently is, she is satisfied with it. She’s normally an active questioner and will advocate for her position. The fact that she didn’t do so here demonstrates that she’s not only made up her mind but doesn’t feel the need to persuade others. If your side is winning, why ask questions of counsel and potentially change the minds of your colleagues?

Second, in order to agree with the legal arguments of Governor Newsom and the State Legislature, she would effectively have to reverse herself on every court decision regarding the Legislature’s power, the power of the voters, and the standards for pre-election challenges to ballot measures in the past twenty years.

These cases, some of which she’s authored herself, completely foreclose what Governor Newsom and the State Legislature are arguing. Now, it could be the case that she’s decided to reverse herself.

However, if she has, you would think that she would have some questions for counsel that would reaffirm her change of heart. Or have questions that would elicit answers about how the past Court decisions had been wrong and needed to be reversed.

If she hasn’t changed her mind on pre-election review of ballot measures and limiting the State Legislature’s power through constitutional amendments, one would have to assume that she’s satisfied the Court isn’t changing its constitutional interpretations. And if that’s the case, she would have no purpose to ask any questions.

Final Takeaway

There is a common saying that the only thing for certain in life is death and taxes. I will add a third certainty to that list, litigation over successful ballot measures that are strongly disliked by elected leaders in California. If the TPGA is successful at the ballot box in November, this fight will be back before the California Supreme Court.

It’s always possible that the Court will remove the TPGA from the ballot. However, it seems very unlikely after yesterday’s oral arguments.

1. For more information on what the TPGA would do, please see here:

2. https://www.politico.com/news/2024/05/08/california-court-tax-initiative-00156834

3. 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.