California Proposition 26, Supermajority Vote to Pass New Taxes and Fees (2010)

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California Proposition 26, or the Supermajority Vote to Pass New Taxes and Fees Act, was on the November 2, 2010 ballot in California as an initiated constitutional amendment, where it was approved.[1]

Proposition 26 requires a two-thirds supermajority vote in the California State Legislature to pass many fees, levies, charges and tax revenue allocations that under the state's previous rules could be enacted by a simple majority vote.[2] Supporters of Proposition 26 called it the Stop Hidden Taxes initiative, saying that fees, levies, and so on imposed by the California government amount to taxes, and should therefore require the same supermajority vote required to enact income or sales tax increases.

According to Allan Zaremberg, president of the California Chamber of Commerce, "The Stop Hidden Taxes initiative will prohibit politicians from using a loophole to raise even more taxes by disguising them as fees. Right now, elected officials at the state and local level pass higher taxes by labeling taxes as “fees” so they can pass or increase them with a 50% vote instead of the two-thirds required by law – and in the case of many local taxes, enact them without a public vote. We need the Stop Hidden Taxes initiative to close this loophole. Higher taxes and fees make it more difficult for businesses to stay in California – the very businesses that employ Californians, create jobs and generate revenue for our state. Increasing employment and growing the economy are crucial to California’s recovery."[3]

Proposition 26 is somewhat similar to Proposition 37 (2000), which was narrowly defeated.

Election results

See also: 2010 ballot measure election results
Proposition 26 (Supermajority Vote for Taxes and Fees)
ResultVotesPercentage
Approveda Yes 4,923,834 52.5%
No4,470,23447.5%
These are the final results for this election as per the California Secretary of State's statement of election results.

Aftermath

Impact on AB 32

In the aftermath of the victory of Proposition 26, supporters of AB 32, the "Global Warming Solutions Act of 2006" expressed concern that even though Proposition 23, an attempt to suspend implementation of AB 32 was defeated on November 2, the fact that Proposition 26 was enacted may spell trouble for the state's ability to impose environmental fees.[4]

According to a story in the New York Times on December 2:

"Many environmental groups fear Prop 26, once it kicks in next year, will be used to attack all manner of environmental fees, including those to be implemented under the state's climate change law (A.B. 32) that limits greenhouse gas emissions starting in 2012."[4]

Seismic Safety Commission

The California Legislative Analyst's Office determined in early 2012 that a method proposed by Jerry Brown for funding the state's Seismic Safely Commission is unconstitutional under the provisions of Proposition 26.[5]

The Seismic Safety Commission was created in 1975 and has an annual budget of about $1.3 million. It has been funded by a fee charged to insurance companies. That fee expired on July 1, 2012. Brown proposed to extend it. However, the LAO said that under the provisions of Proposition 26, that fee would be considered a tax and would have to be approved by a 2/3rds supermajority vote of the California State Legislature. Furthermore, according to the LAO's analysis, a separate provision in the California Constitution says that any taxes levied on insurance companies in the state must be rolled together into one special insurance tax and cannot be assessed on a piecemeal basis, even if the state legislature does have the votes to pass a new tax on insurance companies.[5]

Ballot title and summary

See also: Ballot titles, summaries and fiscal statements for California's 2010 ballot propositions

Ballot title:

Requires that Certain State and Local Fees Be Approved by Two-Thirds Vote.
Fees Include Those That Address Adverse Impacts on Society or the Environment Caused by the Fee-Payer's Business.
Initiative Constitutional Amendment.

Official summary:

  • Requires that certain state fees be approved by two-thirds vote of Legislature and certain local fees be approved by two-thirds of voters.
  • Increases legislative vote requirement to two-thirds for certain tax measures, including those that do not result in a net increase in revenue, currently subject to majority vote.

Estimated fiscal impact:

  • Decreased state and local government revenues and spending due to the higher approval requirements for new revenues. The amount of the decrease would depend on future decisions by governing bodies and voters, but over time could total up to billions of dollars annually.
  • Additional state fiscal effects from repealing recent fee and tax laws: (1) increased transportation program spending and increased General Fund costs of $1 billion annually, and (2) unknown potential decrease in state revenues.

Constitutional changes

California Constitution
Articles
IIIIIIIVVVIVIIVIIIIXXXAXBXIXIIXIIIXIII AXIII BXIII CXIII DXIVXVXVIXVIIIXIXXIX AXIX BXIX CXXXXIXXIIXXXIVXXXV
See also: Text of the Supermajority Vote to Pass New Taxes and Fees Act, Proposition 26

Proposition 26 amended these parts of the state's constitution:

Support

Supporters

The California Chamber of Commerce is a lead force behind the "Stop Hidden Taxes" Initiative.[2]

Other notable supporters include:

"Yes on 26" campaign logo

Arguments were submitted to the official California Voter Guide on behalf of a "yes" vote on Proposition 26, as were rebuttals to the arguments provided by Prop 26 opponents. The signers of these arguments were:[7]

Arguments in favor

Some of the arguments that have been made for a "yes" vote on Proposition 26 include:

  • Susan Shafer, a spokeswoman for the "Stop Hidden Taxes" campaign, says, "Legislators have been using the loophole of only needing 50 percent to pass a fee, but what we’re saying is that they should have a two-thirds vote, because what they are really passing are taxes, not fees."[8]
  • Teresa Casazza, president of the California Taxpayers Association, says, "Instead of using gimmicks to pass or increase hidden taxes on products and services that Californians use every day, legislators will need a two-thirds vote as required by our state Constitution."[8]
  • In order to get around the requirement in the California Constitution that new taxes can't be approved without a supermajority vote, politicians use the loophole of calling the new taxes "fees," which they then pass with a simple majority vote. This loophole should be closed. If it isn't, politicians will use this loophole to impose as much as $10 billion in new taxes.[7]
  • Some of the items that politicians are preparing to impose fees (or hidden taxes) on include food, gas, toys, water, cell phones, electricity, insurance, beverages, emergency services and entertainment.[7]

Donors for

Main article: Donations to California's 2010 ballot propositions

The main committee opposing Proposition 25 was called "Stop Hidden Taxes -- No on 25 / Yes on 26, a Coalition of Taxpayers, Employers, Small Businesses, Environmental Experts, Good Government Groups, Minorities, Farmers and Vineyards." Because the main "No on 25" campaign committee was simultaneously the main "Yes on 26" committee, it is not possible to say how much of this campaign committee's finances were directed at urging a "no" vote on Prop 25 versus urging a "Yes" vote on Prop 26.[9]

According to a Maplight analysis, a total of $17,753,067, including large and small donations, was given to "Stop Hidden Taxes" through November 5, 2010.[10]

Through November 30, 2010, these donations of $100,000 or over went to the main campaign committee that simultaneously favored a "no" vote on Proposition 25 and a "yes" vote on Proposition 26.

Donor Amount
Chevron $3,750,000
California Chamber of Commerce $3,395,000
American Beverage Association $2,450,000
Philip Morris $1,750,000
Small Business Action Committee $1,430,000
Anheuser-Busch $625,000
Conoco Phillips $525,000
Howard Jarvis Taxpayers Association $431,948
Aera Energy $350,000
MillerCoors $350,000
Wine Institute $330,500
Exxon Mobil $300,000
Occidental Petroleum $250,000
Chartwell Partners $250,000
California Association of Realtors $200,000
Shell Oil $200,000
New Majority California $200,000
Kilroy Realty $150,000
Crown Imports $130,000
California Beer & Beverage Distributors $100,000

Sources: Election Track

See also: Vendors and consultants to California's 2010 ballot proposition campaigns

Political consultants who provided paid services to the "Yes on 26" campaign included:

Opposition

"No on 26" campaign logo

Opponents

The California Tax Reform Association[11] is one of "an array of good-government and environmental groups, who see the latest proposal as simply a vast corporate loophole. They angrily contend that companies cloak themselves as the defenders of jobs and fairness, when in fact they are gaming the system to maximize profits."[11]

Health Access California opposes Proposition 26, saying, "The worst measure on the ballot is Proposition 26, which protects polluters and other corporations from having to pay for the health, environmental, and other damage they cause."[12]

The arguments against Proposition 26 in the state's official Voter Guide, and the rebuttal to the arguments by Proposition 26 supporters, were written by:

Others who are opposed to the Proposition include:

Health Organizations

Health

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Arguments against

Some of the arguments that have been made for a "no" vote on Proposition 26 include:

  • Proposition 26 should be called the "Polluter Protection Act" because it will make it harder to impose fees on corporations that cause environmental or public health problems. For example, it would be harder to impose so-called "pollution fees" on polluting corporations because it will take a higher vote to pass such fees than is currently needed.[7]
  • If local governments are required to hold an election every time they want to impose a new fee, Proposition 26 will end up "harm[ing] local public safety and health, by requiring expensive litigation and endless elections."[7]

Donors against

See also: Donations to California's 2010 ballot propositions

By the time the November 2 election was over, 9 different campaign committees had filed in opposition to Proposition 26. Of the 9, only 3 were exclusively devoted to campaigning against Proposition 26. The other 6 campaign committees all mentioned Proposition 23 in the list of propositions they were opposed to. Due to the nature of these combined committees, it is impossible to say with exactitude how much of the money that is contributed to a combination committee was spent on a specific proposition. Proposition 23 attracted very significant opposition donations and it is likely that a majority of the money contributed to combined committees registered against both 23 and 26 was spent fighting Proposition 23, rather than Proposition 26, although this cannot be established with precision.

The names of the 9 campaign committees registered in opposition to Proposition 26 were:

  • Taxpayers Against Protecting Polluters No on Proposition 26
  • Marin Institute Charge for Harm No on Prop 26 Committee
  • No on 26, Teachers, Police Officers and Other Public and Private Employee Groups Protecting Taxpayers
  • California Alliance Action Fund; A Committee Sponsored by Social Justice Organizations for Proposition 24, 25 and Against Propositions 23, 26
  • Communities Against Proposition 23 and 26, Sponsored by Ella Baker Center for Human Rights
  • Ballot Initiative Strategy Center - CA Opposed to Prop 23 and Prop 26
  • Environmental Defense Action Fund Say No to Prop 23 and 26 Committee
  • Californians for Clean Air and Clean Energy Jobs, No on 23, No on 26, A Project of California League of Conservation Voters
  • Clean Energy and Good Jobs Mobilization Committee - No on 23 and 26

Through November 30, 2010, these donations of $75,000 or over went to any of the 9 campaign committees registered against Proposition 26. Adding the total of these figures results in a higher total campaign contribution figure than was actually received by the total of the 9 committees because several of the committees made contributions to the other committees.

After adjusting for committees donating to other committees, Maplight records the total spent against Proposition 26 as of November 5, 2010 as $6,593,639.[13]

Donor Amount
League of Conservation Voters $1,655,000
Californians for Clean Energy $1,450,000
Democratic State Central Committee $1,345,056
Thomas Steyer $1,000,000
Californians for Clean Air, No on Prop 23 $900,000
No on 23, Stop the Dirty Energy Proposition $625,000
SEIU $595,000
California Teachers Association $504,240
L. John Doerr $500,000
Clean Energy and Good Jobs $446,000
Hannelore Grantham $400,000
Susan Mandel $400,000
Natural Resources Defense Council $390,000
Sierra Club $325,000
SCOPE State Alliance $325,000
Ballot Initiative Strategy Center $302,000
Nature Conservancy $300,000
America and California Federations of Teachers $255,000
Joseph Gleberman $250,000
Brook and Shawn Byers $200,000
A.L.L.E.R.T. $200,000
California Public Securities Association $150,000
State Building and Construction Trades Council $150,000
Taxpayers Against Protecting Polluters $150,000
Environmental Defense Action Fund $150,000
California School Employees Association $80,000
National Education Association $75,000

See also: Vendors and consultants to California's 2010 ballot proposition campaigns

Political consultants who provided paid services to the "No on 26" campaign included:

Editorial opinion

See also: Endorsements of California ballot measures, 2010
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"Yes on 26"

  • Orange County Register: "This proposition accomplishes needed reforms to restrain tax-grabbing politicians who want taxpayers to bail them out for poorly managed budgets and long histories of overspending."[14]
  • Long Beach Press-Telegram: "Owners of small businesses know what it's like to get saddled with "fees" that are no more than gimmicks to funnel money into political purposes, at the expense of businesses, consumers and taxpayers. Henceforth, those "fees" would take a two-thirds majority vote by the Legislature or, at the local level, by public vote."[15]

"No on 26"

  • Bakersfield Californian: "the prospect of requiring a two-thirds vote to approve even the most routine and reasonable fees -- quite possibly in an endless parade of special elections -- is burdensome and stifling. Proposition 26 would set off a bureaucratic nightmare and bring local governments to their knees."[16]
  • Contra Costa Times: "Many of the fees and charges that would become taxes under Proposition 26 are those imposed to deal with health, environmental or other societal concerns. For example, the state imposes a regulatory fee on oil manufacturers to pay for local oil-collection programs, recycling and inspections of used-oil recycling facilities. Proposition 26 goes too far in fiscally handcuffing local and state governments."[17]
  • Fresno Bee: "passage of Proposition 26 could result in a two-thirds vote requirement for fees that benefit the public broadly. Examples include hazardous material fees that go to clean up toxic waste sites or promote pollution prevention, and municipal fees on alcohol retailers that go to code enforcement."[18]
  • Lompoc Record: "Proponents insist passage of Proposition 26 would keep politicians from enacting hidden taxes, but what it really does is shift the burden of paying for environmental degradation from big business to individual taxpayers."[19]
  • Los Angeles Daily News: "In theory, it's a fabulous idea: If fees are as difficult to pass as taxes maybe city and county and state officials would stop raising every fee known to man. In practicality, it will stop the legitimate fees such as those charged of private companies when they impact city services - services individual Angelenos must pay for. Is it right that our property taxes alone pay for the public safety response to Staples Center events? Yes, we know that governments have abused and misused fees. We know that government has gotten especially creative with new revenue-raising schemes to back-fill their general funds. We expect this will not stop them from dreaming up new ways to get around Proposition 26."[20]
  • Los Angeles Times: "Proposition 26 goes much too far, making it extremely difficult to charge businesses for the damage they cause and instead sending the bill to everybody else."[21]
  • Modesto Bee: "this initiative, like Proposition 25, is not a product of deliberation involving multiple stakeholders. It is a partisan power play."[22]
  • Sacramento Bee: "If Proposition 26 were to pass, it would be harder to assess certain industries for the costs they pass onto society through pollution, public inebriation and other harmful side effects. Not surprisingly, Proposition 26 is supported by industries that sell alcohol or produce pollution and want to limit their exposure to new fees."[23]
  • San Bernardino Sun: "Proposition 26 would only worsen the gridlock in Sacramento."[24]
  • San Diego Union-Tribune: ."..with a $19 billion budget deficit, now is not the time for voters to stand on principle and pass a proposition that is likely to cut billions in revenue."[25]
  • San Gabriel Valley Tribune: "We don't want to see liquor, tobacco and oil companies get a break, not when taxpayers are suffering under an already heavy tax burden. That's why Proposition 26 should be defeated. The measure should be called the gang-up-on-the-taxpayers initiative."[26]
  • San Jose Mercury News: "Companies that deal with hazardous waste, for instance, pay a fee that helps fund the cleanup of toxic sites. Under Proposition 26, the introduction of new programs or the expansion of existing ones like this would face an impossible hurdle in a two-thirds vote."[27]
  • Santa Rosa Press Democrat: "So what would be worse than a $19 billion state budget deficit? A $20 billion budget deficit. Pardon the sophomoric humor, but an extra $1 billion in red ink is among the consequences if voters approve Proposition 26 on the Nov. 2 ballot."[28]
  • Ventura County Star: "the initiative affects fees paid by chemical companies to help cover the costs for public agencies to respond to chemical accidents.Some industries chafe at such fees, which they claim are actually taxes. Proposition 26 would officially define them as taxes, not fees, and would demand a two-thirds legislative vote to impose them instead of the simple majority vote now required. However, that argument has had its day in court, and lost. In 1997, the California Supreme Court ruled — in a case involving a maker of lead-based paint — that such majority-vote fees are permissible, and aren’t taxes, because they raise revenue to deal with the effects of a particular industry."[29]

Path to the ballot

Clipboard48.png
See also: California signature requirements

Supporters of the proposal turned in 1.1 million signatures to election officials on May 7, 2010.[30] Election officials had until June 24 to inspect the signatures and announce a decision about whether the measure qualified for the state's November 2 ballot. The initiative was the 8th initiative intended for the November ballot to have signatures filed on its behalf.

Signatures to qualify Proposition 26 for the ballot were collected by National Petition Management at a cost of $2,341,023.[31]

Seven versions of the proposal were filed, but signatures were only collected on one version, 09-0093.

See also: 2010 ballot measure petition signature costs

External links

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Basic information

Supporters

See also: 2010 ballot measure campaign websites

Opponents

See also: 2010 ballot measure campaign websites

Additional reading

References

  1. Associated Press, "Anti-tax initiative qualifies for November ballot," June 24, 2010
  2. 2.0 2.1 San Francisco Chronicle, "Chamber of Commerce pushes anti-tax initiative," April 15, 2010
  3. No More Hidden Taxes, "Stop Hidden Taxes Turns in More than 1.1 Million Signatures to Qualify Ballot Initiative for November 2010 Election," May 7, 2010
  4. 4.0 4.1 New York Times, "Is It a Water-Rights Fee or a Backdoor Tax? Calif.'s High Court Will Decide," December 2, 2010
  5. 5.0 5.1 Huffington Post, "California Seismic Safety Commission May Lose Funding," April 7, 2012
  6. List of organizations endorsing the "Stop Hidden Taxes" initiative
  7. 7.0 7.1 7.2 7.3 7.4 7.5 Arguments for and against Proposition 26 in the California Voter Guide
  8. 8.0 8.1 Capitol Weekly, "Fight of the majorities: simple vs. two-thirds," June 3, 2010
  9. Donations of $5,000 or more to the "No on 25" campaign committee
  10. Maplight, "California Proposition Contribution Totals", November 5, 2010
  11. 11.0 11.1 Capitol Weekly, Fight of the majorities: simple vs. two-thirds By John Howard | 06/03/10 12:00 AM PST
  12. California Progress Report, "Backing Ballot Measures On The Budget," July 20, 2010
  13. Maplight, "California Proposition 26 - Campaign Contributions - Nov. 2010," November 4, 2010
  14. Orange County Register, "Calling fees what they are: Taxes," September 22, 2010
  15. Long Beach Press-Telegram, "Yes on Proposition 26," October 11, 2010
  16. The Bakersfield Californian, "Make Legislature fix it: No on Props. 25, 26," October 4, 2010
  17. The Contra Costa Times, "No on proposition 26: Measure would make it too difficult for governments to raise revenues," September 13, 2010
  18. The Fresno Bee, "Vote no on Props 25 and 26," October 1, 2010
  19. Lompoc Record, "Confronting the need for majority rule," October 5, 2010
  20. Los Angeles Daily News, "Power plays: Propositions 25 and 26 - they're both bad policy dressed up as reform," September 26, 2010
  21. Los Angeles Times, "Yes, and no," September 30, 2010
  22. The Modesto Bee, "Vote no on Props 25 and 26," September 30, 2010
  23. Sacramento Bee, "No on Props. 26 and 26 - partisan power plays," September 27, 2010
  24. San Bernardino Sun, "Bad policies posing as reform," October 14, 2010
  25. San Diego Union-Tribune, "Pragmatism dictates rejecting Props. 22, 26," September 22, 2010
  26. San Gabriel Valley Tribune, "Our View: No on Proposition 26; keep polluters accountable," October 7, 2010
  27. San Jose Mercury News,"One more time, vote no on Proposition 26," October 29, 2010
  28. The Santa Rosa Press Democrat, "No on 26: After losing in court, businesses ask voters for shield against fees," September 23rd, 2010
  29. The Ventura County Star, "Prop 26 deserves a no vote," September 15, 2010
  30. Sacramento Bee, "Measure requiring two-thirds vote to OK fees turns in signatures," May 7, 2010
  31. "Yes on Prop 26" campaign expenditures