Dirty Tricks Used to Increase Your Taxes

Perhaps California’s political structure hasn’t quite devolved into the kind of despotic regime like we see in North Korea or Venezuela, but that doesn’t mean we’re not headed in that direction. As reported last week in this column, the attack on Proposition 13 is now in full gear as proponents of the infamous “split roll” initiative are on the streets collecting signatures for their new $12 billion property tax increase on Californians.

The measure, entitled the California Schools and Local Communities Funding Act of 2020, would remove one of Proposition 13’s most important protections, the limitation on annual increases in taxable value, from commercial properties. Proponents of the measure have made it clear that their ultimate objective is the full dismantling of Prop. 13, even for homeowners. Taxpayers and businesses are ready for a tough battle, but there remains an open question about what happens when the other side cheats. Two things happened lately that reflect the tax-and-spend lobby’s “win at any cost” mindset.

First, with an assist from a politically biased politician serving in the Attorney General’s office, proponents were able to secure a one-sided title and summary to the signature petitions.

The title and summary that Xavier Becerra issued on Oct. 17 begins by emphasizing higher funding for education, a main selling point that is popular among voters. This title differs from the original version of a similar measure that highlighted the tax implication for commercial property — something a recent poll suggests would be rejected by voters.

To read the entire column, please click here.

A Victory for California Taxpayers

This past week a direct attack on Proposition 13 was resoundingly voted down by the California State Assembly. Assembly Constitutional Amendment 1 would have changed a key element of Prop. 13 by lowering the current two-thirds vote needed to pass local bonds and special taxes — including parcel taxes — to just 55 percent.

Bond debt and parcel taxes are paid by adding extra charges to property tax bills, sometimes for decades, which are not subject to Proposition 13’s one-percent cap. The two-thirds vote requirement is a crucial taxpayer protection because while everyone gets to vote on these local measures, only property owners pay for them.

If ACA 1 had been approved by two-thirds of each house of the state Legislature, it would have gone on the ballot, where it would have needed only a simple majority to pass. That would have changed Proposition 13 to allow tax increases for anything defined as “infrastructure” to pass with the approval of only 55 percent of the electorate in any (or every) subsequent election.

Taxpayers face a treacherous landscape in California. Legislative Democrats have more than super-majority control over the Assembly, meaning seven Democrats could oppose ACA 1 and it still would have passed. Taxpayer advocates, led by Howard Jarvis Taxpayers Association, were outnumbered by about 15 to 1 in the halls of the Capitol as lobbyists for local government entities including cities, counties, special districts and firefighters raced from office to office looking for last-minute support.

To read the entire column, please click here.

Government Adds Insult By Cheating On Tax Collections

It’s bad enough that California taxes its citizens more than almost all other states, but adding insult to injury, government entities often cheat on the way that they collect taxes.

This happens in several ways. First, there are times when a government entity knows a tax is illegal but imposes it anyway either hoping no one will notice or knowing they can collect tons of revenue while the issue is resolved in court.  This author’s first experience with governments’ complete disregard of the law occurred 25 years ago in the 1994 case of Hoogasian Flowers v. San Francisco Educational Financing Authority.

In an effort to circumvent Proposition 13’s two-thirds voter approval requirement for special taxes, San Francisco created an entity called an “educational financing authority” for the purposes of imposing a supplemental sales tax. Although the Court of Appeal easily saw through the charade and struck down the tax as illegal, the only remedy that was given was a small refund for the handful of retailers who filed the suit. Thousands of businesses never received relief and the city was allowed to keep millions in illegal tax proceeds.

Taxpayers need to remain aware that government entities at all levels have no incentive to make things easy for taxpayers. Just one recent example involves the L.A. County Recorder’s Office and the implementation of Senate Bill 2, which imposes a $75 tax on documents filed in conjunction with real estate transactions.

To read the entire column, please click here.

More Tax Revenue, Bigger Surpluses … And Still Not Satisfied

Tax revenue and government surpluses are up all over California, but that fact doesn’t satisfy advocates for more and more taxes. Tax raising activists could step on each other in the charge for more money.

It was reported last week that the state brought in another $1 billion in unexpected revenue. Already, California is sitting on its largest surplus in history, more than $20 billion.

And that is just the surplus in the state’s General Fund.

Other pockets of money for special purposes in the budget are also enjoying surpluses. One calculation estimates that these special fund balances have surpluses totaling $16-plus billion. Combined with the declared surplus of the General Fund, there is nearly $37 billion stashed away for a rainy day.

And there could be more.

Remember the recent controversy stirred up by State Auditor Elaine Howle who reported that the Cal State system had a reserve “hidden” from legislators of $1.5 billion.

Yes, there is a reason to have surpluses in government accounts to deal with economic downturns. But when do surpluses become “obscene” for government hoarding taxpayers’ money? The term “obscene surplus” was coined by California treasurer Jesse Unruh, a Democrat, in the late 1970’s that became a crucial fact in the run-up to the vote on Proposition 13.

On the local level, money is flowing as well. Property values are soaring all over the state. Not only San Francisco (up 6.6%) and Los Angeles (up 6.25%) have enjoyed increased values which come with increased tax revenues because of new construction and property sales, but most other counties have seen similar boosts, for example Fresno (up 5.84%) and Kings (up 6%).

With the state awash in tax revenue and sitting on surpluses why is there so much talk of moving forward with major tax increases? The split roll property tax increase is already on the ballot in 2020 to raise taxes on commercial property. Now the School Boards Association is considering putting forward a tax increase on the wealthy income taxpayers and corporations. In each case, the tax take annually is estimated up to $11 billion; that is until real world economics hit.

Then there is the proposal in the Bay Area to raise taxes $100 billion over 40 years to deal with the areas transportation woes. Sure, traffic is terrible and it is good to think about how to handle it, but if this measure appears with the other big tax proposals all aimed at the 2020 November ballot–and all these tax increases became a reality–the Bay Area probably won’t have a transportation problem because a lot of people would just leave.

More, more and still not satisfied.

Joel Fox is Editor and Co-Publisher of Fox and Hounds Daily.

This article was originally published by Fox and Hounds Daily.

Local Tax Conflict Heats Up

For decades, it’s been an article of political faith – as well as law – that local government taxes designated for particular purposes require two-thirds approval by voters.

The supermajority vote provision was created by Proposition 13, California’s famous – or infamous – property tax limit measure, passed by voters in 1978, and later bolstered by another initiative, Proposition 218.

Two years ago, however, the state Supreme Court seemingly carved out a way for local governments to sidestep that law. It implied, in ruling on a Southern California marijuana case, that if special purpose tax measures are placed on the ballot by initiative petition, rather than by the local governments themselves, the two-thirds vote threshold might not apply.

Ever since, those who want to raise local taxes have yearned to learn whether the Supreme Court really meant to make an exception and, not surprisingly, San Francisco’s very liberal city government, acting on the advice of City Attorney Dennis Herrera, volunteered to become the legal guinea pig.

Members of the city’s governing body, its Board of Supervisors, personally sponsored two tax increase initiatives last year, one for the June election and another in November, both listed on the ballot as “Proposition C.”

The June measure, a tax on commercial rents to finance early childhood education and child care services, received 51 percent voter support. The November proposal, a tax on businesses to finance services and housing for the homeless, garnered 61 percent voter support.

With both votes below two-thirds, opponents of the measures sued, contending that they were invalid. The city began collecting the taxes, but not spending them, while the legal battle raged.

Last week, San Francisco Superior Court Judge Ethan Schulman agreed with Herrera and validated both taxes. However, he doesn’t have the last word. Business and anti-tax groups, such as the Howard Jarvis Taxpayers Association, vowed “an immediate appeal” and the issue is clearly headed to the state Supreme Court for a definitive ruling.

A third San Francisco tax measure, also placed by initiative petition and receiving a simple majority approval from voters in 2018, is also being contested. Proposition G imposes a new “parcel tax” on homes and other real estate to increase teacher pay.

Were the state’s highest court to convert its 2017 implication into declarative law, it would almost completely change the dynamics of local tax battles.

Rather than propose special purpose taxes directly, local officials and their political allies, especially public employee unions, could do it via initiative petition and completely bypass the long-standing supermajority vote requirement.

There is, however, another wrinkle to the situation.

Last year, as the San Francisco tax measures were being challenged, the state Supreme Court issued another decision that could affect the eventual outcome.

It declared that when former San Diego Mayor Jerry Sanders sponsored a 2012 ballot measure to reform city pensions, he was acting in an official capacity, not as a private citizen, and therefore was legally obligated to “meet and confer” with unions on something that affected their members’ compensation.

Logically, if Sanders was under that legal obligation as an official while sponsoring a ballot measure, then members of the San Francisco Board of Supervisors also were acting officially, and not as ordinary citizens, when they sponsored their tax measures. If so, their measures probably should have been subject to the supermajority rule.

It will be interesting to see how the court balances one ruling with the other, if it can, with financial stakes astronomically high in the outcome.

This article was originally published by CalMatters.org

Measure EE tax hike for LAUSD fails

A proposed parcel tax ballot measure that would have created a new stream of local funding for the Los Angeles Unified School District went down to defeat at the hands of voters late Tuesday, even as its supporters acknowledged it had an “uphill battle” from the beginning.

With all precincts reporting following the day’s special election, 54.32% of the electorate —165,294 voters — said no to Measure EE, and 139,027 — 45.68% — said yes, a far cry from the required two-thirds majority of voters need to pass the controversial measure. As the only item on the ballot in most parts of the massive district, low turnout was anticipated.

A total of 304,321 voters cast ballots for or against Measure EE in Tuesday’s election.

The district placed this parcel tax on the ballot — an annual charge of 16 cents per square foot of developed property — to help pay for a labor contract agreement reached with striking teachers and ease its financial burden due to ballooning pension costs and declining student enrollment.

The campaign was quickly launched in the wake of a high-profile strike in January, as district leaders hoped to capitalize on public support for picketing teachers. …

Click here to read the full article from the LA Daily News

Two tax hikes for schools could end up on California’s 2020 ballot

Though it’s never a sure bet that California voters will sign off on a tax increase, the odds improve when the money is promised to schools. Less clear, though, is what happens if two school tax measures are on the same ballot — now a distinct possibility for next year’s statewide election.

Asking voters to weigh in on how to pay for education is hardly new, from the creation of the California Lottery in 1984 to the 1988 ballot measure that created strict constitutional funding formulas. A nonpartisan statewide poll released last month found that 59% of likely voters believe current public school funding isn’t sufficient. And while K-12 education is getting more money than ever before, a variety of long-term problems have left many California school districts in financial distress.

With that in mind, the California School Boards Assn. is strongly hinting it may draft a November 2020 ballot measure asking voters to impose $11 billion in new taxes for schools — specifically, a tax hike on corporate income over $1 million and on personal incomes above $1 million. A CSBA spokesman said additional details of the proposed taxes are still being hashed out. …

Click here to read the full article from the L.A. Times

Use $21 Billion Surplus Instead of Taxing Californians More

California has a record $21.5 billion surplus.

That’s the good news. The bad news is that we have all that money because you are being overtaxed.

Earlier this month, Gov. Gavin Newsom released his revised budget proposal, the largest in California history.

At a staggering $214 billion dollars, the budget is larger than that of most nations and every other state.

The budget also includes a new $140 million tax on water customers to help all Californians have access to clean water.

Clean water is important, and there are a million people in the Central Valley without access to it. But do we need a new tax to pay for it?  Maybe we don’t.

To read the entire column, please click here.

Guns, gas and soda – most California tax proposals died at the Capitol, but a few remain

California lawmakers this year put forward new tax proposals that would have hit soda drinkers, bankers and gun owners  not to mention anyone with a car.

Most of those proposals died this week in a major culling of bills, leaving only a handful of tax measures in place.

Some of them died before they reached the Senate and Assembly Appropriations Committees, while others were pulled by their authors. The remaining were left to consideration on Thursday by the two checkpoint committees that decide which bills can move forward this legislative session. …

Click here to read the full article from the Sacramento Bee

California is reviewing 23,500 state tax refunds it paid too soon

California erroneously sent refunds to 23,500 taxpayers last month, according to an announcement Tuesday from the state’s Franchise Tax Board.

The department responsible for collecting state personal income and corporate income taxes said a “system error” from March 8 to March 11 caused it to issue refunds to people without first verifying the amount of money people claimed was automatically taken out of their paycheck.

As a result, as many as 23,500 Californians might have their income tax returns adjusted, though the board said the vast majority aren’t expected to change.

The FTB said it will spend the next few weeks reviewing all of the affected accounts. …

Click here to read the full article from the Fresno Bee