Many perspectives, 1 simple etiquette

Supreme Court Makes Local Tax Hikes Easier

Author: Dan Walters
Created: 19 September, 2020
Updated: 14 August, 2022
3 min read

IVN San Diego Editor's Note: This Supreme Court ruling could have a big effect on San Diego. A proposed hotel tax increase came just short of winning a two-thirds vote in March. Supporters will likely seek a court ruling on the measure.

The following is an independent opinion. Have one of your own? Email it to hoa@ivn.us.

In a roundabout, passive way, the California Supreme Court last week handed a big victory to the advocates of higher taxes.

Without comment, the justices declined to take up a state appellate court decision that would allow specialized local government taxes to be increased by a simple majority of voters, if they are placed on the ballot by initiative petitions rather than by the governments themselves.

The victory for tax proponents, especially government worker unions, was an equally large defeat for anti-tax organizations such as the Howard Jarvis Taxpayers Association. However, it also may bring more ballot box budgeting and indirectly weaken the role of city councils and other locally elected boards.

Proposition 218, approved by California voters in 1996, declares that local governments seeking more revenue must win voter approval. Proposals for general purpose revenue through increases in sales taxes or other levies need only simple-majority approval. However, if cities, counties and other local governments seek new taxes for specific purposes, Proposition 218 requires two-thirds votes.

Three years ago, the state Supreme Court issued a decision called “Upland” because it dealt with a ballot measure on taxing marijuana in that Southern California city.

Writing the 5-2 majority opinion, Supreme Court Justice Mariano-Florentino Cuéllar declared, “Multiple provisions of the state constitution explicitly constrain the power of local governments to raise taxes. But we will not lightly apply such restrictions on local governments to voter initiatives.”

He thus implied that special purpose taxes placed before voters via initiative may not be affected by the two-thirds vote requirement for taxes sought by governments themselves.

Quickly, special purpose taxes placed on the ballot via initiative that garnered less that two-thirds votes were challenged by the Jarvis organization and other taxpayer groups, but trial court judges differed sharply on whether Cuéllar’s opinion did, indeed, validate them.

Two of the tests were San Francisco taxes placed on the ballot via initiatives personally sponsored by members of the city’s Board of Supervisors, one for early childhood education, the other to battle homelessness. Both received less than two-thirds votes, but a local judge, Ethan Schulman, validated them anyway.

In June, a San Francisco-based appellate court upheld Schulman on the homelessness taxes and the Jarvis organization appealed to the state Supreme Court, which last week validated the appellate court ruling by refusing to take it up.

The tax on business gross receipts for homelessness services will raise as much as $300 million a year. “San Francisco voters have the right to direct democracy and self-government,” City Attorney Dennis Herrera said in a statement. “We’re pleased that this legal victory will free up millions of dollars to provide services, housing and mental health treatment for those who most desperately need it in our city.”

The Supreme Court’s action, or non-action, also may validate other disputed special purpose taxes, including another for early childhood education in San Francisco, an Oakland parcel tax for education and a Fresno sales tax for parks. Local judges had blocked the Oakland and Fresno taxes, declaring that Proposition 218 required them to have two-thirds votes.

Local government officials prefer to ask voters for general revenues because they are more flexible. But advocates for particular causes prefer special purpose taxes to prevent revenues from being diverted elsewhere.

The way is now clear for interests with the wherewithal to qualify and pass ballot measures, such as unions, to push for taxes that benefit their members, thus reducing the authority of local elected officials to set budget priorities.