Initiative on Voter Thresholds for Taxes Makes 2024 Ballot

A voter initiative to set voter thresholds for tax increases has qualified for the November 5, 2024 ballot. The Taxpayer Protection and Government Accountability Act (Initiative #21-0042) would amend Article XIII of the state constitution to reverse a series of recent court decisions interpreting the legislative and voter approval requirements for government revenue increases. The initiative also expands the definition of “taxes” to include certain regulatory fees, broadening application of the voter approval requirements.

The initiative would require any “new or higher tax” to be approved by two-thirds of the legislature and a majority of the voters. For local taxes, it would require any increase in general taxes to be approved by the majority of voters and any special tax to be approved by a two-thirds majority of voters. The initiative also provides that any tax increases passed after January 1, 2022 but prior to the effective date of this act would be void 12 months after the act becomes effective unless the tax is reenacted in compliance with the requirements of the initiative.

The authors of the initiative characterized it as a way for voters to “reassert their right to a voice and a vote on new and higher taxes” and fees. The stated purpose of the initiative is to require “any new or higher tax” to be submitted for voter approval, to increase “transparency and accountability over higher taxes and charges,” and to “clarify that any new or increased form of state government revenue” is authorized through the legislative process.

Approval for New or Higher State Taxes

The initiative would amend Section 3 of Article XIII of the California Constitution to state that “every levy, charge, or exaction of any kind imposed by state law is either a tax or an exempt charge.” Any “new or higher tax” must imposed by an act passed by at least two-thirds of legislature in both houses and approved by a majority of the voters.

The initiative also requires that each tax bill to include specific information on the tax, including the type and amount or rate of the tax, the duration of the tax, the annual revenue expected to be derived from the tax, and the use of the revenue derived from the tax. Any proposed change to the use of the revenue from the tax must be adopted by a separate act that is passed by at least two-thirds of legislature in both houses and approved by a majority of the voters.

Additionally, any change in state law that results in any taxpayer paying a new or higher exempt charge must be imposed by an act passed by each legislative chamber. An act must also specify the type of exempt charge, and the amount or rate of the exempt charge to be imposed.

Approval for New or Higher Local Taxes

The initiative would also amend Section 2 of Article XIII C to state that “[e]very levy, charge, or exaction of any kind imposed by local law is either a tax or an exempt charge.” It would require that any local law that increases any general tax, “whether proposed by the governing body or by an elector,” be approved by the majority of voters. It would also require that any special tax, “whether proposed by the governing body or by an elector,” be approved by a two-thirds of the voters.

In keeping with the proposed changes to state tax law, the initiative would also requires each local tax bill to include specific information on the tax, including the type and amount or rate of the tax, the duration of the tax, the annual revenue expected to be derived from the tax, and the use of the revenue derived from the tax.

Overturn Recent Cases

The initiative states that it is “intended to reverse a series of court decisions that have weakened the legislative two-thirds vote and voter approval requirements for government revenue increases.” The most notable of these cases was California Cannabis Coalition v. City of Upland, which involved a dispute over a voter initiative to allow marijuana dispensaries in the city and charge an annual fee on each dispensary. The City of Upland determined that the fee was a general tax and ordered the initiative to be placed on the ballot at the next general election. The court ruled that only a majority of voters rather than two-thirds of voters was required to approve the citizen-initiated measure. The court held that a citizen initiative is not subject to the two-thirds majority requirement that applies to tax increases proposed by local governments.

While Upland involved a general tax, it became unclear whether a two-thirds majority was required to pass voter initiatives that implement special taxes. Courts of Appeal decisions have since concluded that special taxes put up in a citizen initiative can be approved by simple majorities of voters. In April 2021, the California Supreme Court declined to review that decision. By declining its review, the California Supreme Court settled the law that special taxes proposed by initiative required only simple majority voter approval.

Support and Opposition

California business groups support the initiative while labor unions, including public employee unions, and local governments groups oppose it. A similar initiative qualified for the ballot in 2018 but was withdrawn in an agreement to pass AB 1838, which banned local soda taxes until 2031. In the most recent attempt, in 2022, the initiative did not receive enough votes to qualify for the ballot.

The California Special Districts Association (CSDA), a local government group, called the initiative the “most consequential proposal to limit the ability of the state and local governments to enact, modify, or expand taxes, assessments, fees, and property-related charges since the passage of Proposition 218 (1996) and Proposition 26 (2010).” The CSDA said “public agencies would face a drastic rise in litigation that could severely restrict their ability to meet essential services and infrastructure needs.”