California Divided

by Brent E. Zepke, Esq.

This is a story of a California divided into two groups over taxation.

It is a true story. 

Group 1 wants fewer taxes and for giving taxpayers the ability to vote on taxes and fees. I am labeling their objectives the “right thing.” Their efforts were not successful due to their being told they tried the “wrong way.” 

 Group 2 wants to deny taxpayers any vote on the taxes and fees they pay. I am labeling their objectives the “wrong thing.” They were successful due to their being told they tried the “right way.”  

Who told Group 1 they tried the ‘wrong way,” and Group 2 tried the “right way?”

 The California Supreme Court.

Here is how it happened.

Group 1

Headed by the California Business Roundtable, submitted the “Taxpayer Protection and Government Accountability Act” (TPA), with 1.43 million signatures, to the California Secretary of State Shirley Weber for inclusion as an initiative for voters to decide in the November 2024 general election.

The overall objective of the TPA was to give taxpayers a vote on their taxes and fees based upon:

1. “Californians are overtaxed” by citing the U.S. Census Bureau that the state’s combined state and local tax burden is the “highest in the nation”;

2. That the legislation proposed in 2021 continued to raise taxes and fees despite revenue surpluses;

3. The “hidden fees” passed to consumers in the price they pay for products, services, food, fuel, utilities, and housing;

4. Working families and job-providing businesses are being pushed out-of-state;

5. Attempts to control costs through Propositions 13, 62, 218, and 26, have failed. 

Who could possibly oppose these objectives?

Group 2

Headed by Governor Gavin Newson and the California legislature, sued to prevent Secretary Weber from giving taxpayers the right to vote on the TPA in the November general election.

The California Supreme Court

Mark Twain’s words “I didn’t have time to write a short letter, so I wrote a long one instead,” came to mind as I read Justice Liu’s 51-page opinion in Legislature of the State of California v Weber, (S281977), June 20, 2024. 

Justice Goodwin Lui, for a unanimous Supreme Court, used his scrivener’s talent to deny taxpayers the protection offered in the TPA in the California Constitution, Article II:  

“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 my require.” 

The Justice managed to “end run” Article XVIII that provides, in part;

            “The electorate may amend the Constitution by an initiative”

How did Justice Lui justify labeling the Business Roundtable’s using the “initiative” the ‘wrong way?” 

Court’s Reasoning

Justice Lui decided that the TPA was not an “amendment,” which would qualify for an “initiative, based on an “amendment” being defined as “an addition or change within the limits of the original instrument.”   

Instead, Justice Liu held that the TPA was a “revision,” which he defined as “changing the underlying principles” upon which the instrument rests, as well as the substantial entirety of the instrument. 

A “revision” must be done “by way of a constitutional convention and popular ratification or by submission to the voters from a super majority of the Legislature.”

Amendment or revision?

Here are a few of the reasons the Court cited for holding the TPA was a “revision”:

The TPA, in Section 9 of Article II, changed “a tax means any’” to “a tax means “every” levy, charge, or exaction of any kind imposed by the “State,” which would be changed to “state law.” 

Really? Changing “any” to “every,” or “imposed by the State” to “state law,” is a “revision” that requires “changing the underlying principles?”   

The TPA would change the state’s burden of deciding whether a tax, levy or charge, or other exaction, from “a preponderance of the evidence” to “clear and convincing” evidence.

Same question for changing “a preponderance” to “clear and convincing?”

 Exempt Charges

“Exempt charges” are those in which the people, or legislature, have no vote.

The TPA sought to have these charges be subject to a referendum.

Are there many “exempt” charges? 

There are 200 California agencies – according to Justice Liu – with the power to levy “exempt” charges in the form of taxes and/or fees.

No, 200 is not a typo. The Court listed 200 on page 37 of their opinion. 

Importantly, politicians have the power to appoint the heads of these 200 state agencies, who have no accountability to taxpayers.

The Court cited that just one agency, the Division of Motor Vehicles (DMV), lists 70 different fees that bring in $8 billion.

Subsequently

Just two weeks after the Court decision, the IRS identified in its report for 2022 – I would have preferred a report for 2023, but this is the government – that California taxes middle income residents, which it identified as making $68,350 a year, at a higher rate than do most states tax millionaires.

The IRS, for 2022, ranked California as the biggest loser of Adjusted Gross Income (AGI) at $23.8 billion.

California even led second-place New York, who lost $14.2 billion of AGI, by almost $10 billion.

The Future

Whether the Court stretched the law is now a moot point. 

California taxpayers can expect more of the same unless, and until, objectives such as those proposed by the TPA, are enacted. Since it appears that the existing politicians will oppose such changes, it is time to change the politicians.

Vote by November 5.

SB Current is a reader-supported publication. If you enjoy receiving our mix of daily features please consider upgrading to a paid subscription.

If you’d rather not tie yourself to a monthly or yearly contribution, a one-time donation would work too.

Whatever you choose, your encouragement and patronage is greatly appreciated.