Caltaxletter November 5, 2010

Election 2010 – Statewide Ballot Measures:
Voters Reject Taxes, Stop Hidden Taxes and Expand Redistricting Reform

In Tuesday's election, California voters sent a strong "no new taxes" message to Sacramento, telling policymakers that they are opposed to higher taxes and tax-like fees, and siding with the California Taxpayers Association on five out of six statewide propositions.

In a major victory for taxpayers, voters approved Proposition 26, which protects taxpayers by specifying that tax-like "fees" require the same vote as taxes. The measure received 52.8 percent of the vote. CalTax supported this initiative to end the current practice in which politicians disguise taxes as "fees" so they can approve them with fewer votes than required for taxes.

"Proposition 26 requires honest budgeting," CalTax President Teresa Casazza said. "From now on, if elected officials want to pass a new tax, they have to call it a tax and meet the requirements for approving a tax."

Voters rejected two measures that directly called for tax hikes:

· Proposition 24, which would have repealed recent tax incentives designed to create jobs, was opposed by 58.5 percent of the voters. CalTax opposed this measure.

· Proposition 21, which would have imposed a new car tax to raise funds for the state parks system, was opposed by 58.1 percent of the voters. CalTax opposed this attempt at ballot-box budgeting.

The one measure that voters and CalTax diverged on was Proposition 25, which received 54.8 percent of the vote. The measure lowers the vote threshold to a majority for the Legislature to approve the state budget, and docks the pay of legislators if a budget bill is not passed on time. CalTax and other opponents noted that the pay-docking provisions lack teeth (lawmakers can approve any budget legislation in order to qualify for their full pay, even if the legislation is not a serious, balanced budget proposal).

Discussing Proposition 25, Casazza said:

"Throughout the campaign, we were very concerned that legislators would try to use the language of Proposition 25 to justify a majority-vote tax increase. While our concern still remains, it is tempered in part by several factors, most notably the clear and consistent message from Proposition 25 proponents to voters that the measure in no way undermines the two-thirds vote requirement for raising taxes in California. In TV ads, radio ads, ballot arguments, mailers, interviews with media outlets, court filings and in all their communications to voters, the Yes on 25 campaign repeatedly told voters that Proposition 25 would not change the two-thirds vote requirement for raising taxes. In addition, the ballot label provided by the attorney general also told voters that Proposition 25 would not change the two-thirds vote requirement for taxes.

"While these factors should provide an absolute legal bar to any attempts by the Legislature to raise taxes with less than a two-thirds vote, they do not obviate our concern that some in the Legislature may try to pull a fast one on voters and use Proposition 25 to justify a majority-vote tax increase. We will continue to monitor the Legislature very closely to ensure it does not attempt to use Proposition 25 to raise taxes with anything less than the constitutionally required two-thirds vote."

Under the current composition of the Legislature, passage of Proposition 25 gives the Democrats ownership of the budget. However, Governor-elect Brown said November 4 that he wants a bipartisan effort to solve the budget problem.

Voters agreed with CalTax on the need for redistricting reform, supporting reforms with two votes:

· Proposition 20, which expands the authority of the state's independent redistricting commission (created by voters in 2008) to draw congressional districts along with legislative and Board of Equalization districts, was approved with 61.2 percent of the vote.

· Proposition 27, which would have abolished the redistricting commission and returned to a system in which politicians control reapportionment, was defeated, with 59.5 percent in opposition.

"The voters stood up for fair redistricting by protecting the reforms they approved two years ago, and by eliminating a glaring conflict of interest in the congressional redistricting process," Casazza said. "Elections will be more competitive now that elected officials no longer have the power to draw the lines for their own districts."

CalTax did not make a recommendation on Proposition 19, the marijuana legalization measure, which failed; Proposition 22, which prohibits the Legislature from borrowing, transferring, shifting, or reallocating gas tax, property tax and car tax revenues that are intended for local government purposes, and was approved; or Proposition 23, the measure to delay implementation of the Global Warming Solutions Act of 2006 until California's unemployment is reduced to 5.5 percent or lower for four consecutive quarters, which failed.

CalTaxletter, November 5, 2010