The Coastal Post - September, 1997

California's Dirty Little Secret


It was late in the evening during the June 5th session when the Democrats tried to pull the wool over our eyes by raising taxes with a simple majority vote. Before the measure was taken up, we quickly pointed out that the state constitution requires a two-thirds vote to pass a tax increase. Speaker Pro Tem Sheila Kuehl immediately referenced a Legislative Counsel Opinion and stated that the measure required only a simple majority vote because it was "revenue neutral." Her ruling was challenged by Republicans and subsequently rejected by the Democrat majority. The measure passed with the minimum 41 votes.

This is California's dirty little secret. For 16 years, the Democratic majority in the Legislature has been raising taxes in violation of our Constitution by skirting the requirement that such measures clear both houses of the Legislature with a two-thirds vote. The perpetrator lurking behind this injustice is none other than Willie Brown, Jr., the former Assembly Speaker who made his own rules and governed with an iron fist.

Since 1981, the Assembly and Senate have been raising taxes, in defiance of constitutional safeguards, based on a legal opinion issued by the Legislative Counsel. What does the opinion say? Nobody really knows. Brown kept the legal opinion under wraps, perhaps to avoid public scrutiny. Even today, when other legislators request a copy of that opinion from the Legislative Counsel, they are told that it is a secret, protected by attorney-client privilege.

When voters approved Proposition 13 in 1978, they amended the Constitution to add Article XIIIA (3) stating that, "any changes in state taxes enacted for the purpose of increasing revenues collected pursuant thereto whether by increased rates or changes in methods of computation must be imposed by an Act passed by not less than two-thirds of all members elected to each of the two houses of the Legislature..."

The analysis of Proposition 13 contained in the 1978 voter guide described this provision in plain English: "This initiative would require a two-thirds vote by the Legislature to increase state taxes."

In fact, all the literature surrounding Proposition 13 described the initiative as requiring a two-thirds vote by the Legislature to increase taxes. In his book, I'm Mad As Hell, Howard Jarvis wrote, "...we made it possible in 13 for government officials to raise taxes, but only if they could get a two-thirds majority in favor of higher taxes." A publication of the People's Advocate, co-sponsor of Proposition 13, stated, "It is time to impose a two-thirds legislative vote requirement instead of the simple majority at present for raising state taxes."

If the Constitution is so clear, how did Brown and his colleagues manage to circumvent this two-thirds vote requirement? Simple. Article XIIIA(3) requires a two-thirds vote where the tax changes are "enacted for the purpose of increasing revenues." Brown reasoned that increasing taxes for the purpose of decreasing someone else's taxes is not "for the purpose of increasing revenues." He labeled such measures "revenue neutral" and ruled that they were exempt from the two-thirds vote requirement.

It's a clever bit of analysis, but it's wrong. By definition, all tax increases are "for the purpose of increasing revenues." It is irrelevant that the increased revenues might be earmarked to cover the cost of giving someone else a tax cut. The constitution does not make any distinction as to how the increased revenues should be used.

Proposition 13 was designed to protect people from tax increase measures that couldn't muster two-thirds support. Those who are hit by tax hikes through so-called "revenue neutral" legislation feel the same impact as those who are hit by tax hikes through other legislation. For instance, why should those in charge of fish-habitat restoration projects enjoy a tax cut at the expense of a tax increase against the timber industry? This actually happened, with less than a two-thirds vote, under Assembly Bill 2925 (Sher), Chapter Number 1296, Statutes of 1994. The point is, each taxpayer is entitled to the same constitutional protections, regardless of how the state is impacted.

Willie Brown's exception is not found in the Constitution, was never discussed during the debate on Proposition 13, and has never been upheld by any court.

The danger of this dubious exception is in the details. Revenue neutral means that at the time the legislation is proposed, it is estimated that it will be revenue neutral. Estimates are often wrong and can easily be manipulated. Years later, we might find that the tax increases under a "revenue neutral" bill far exceeded the tax cuts. In fact, a request to determine these outcomes was recently submitted to the Legislative Analyst's Office. Soon enough, everyone will know what the real effect of a "revenue neutral" tax hike is.

Moreover, with the advent of so-called negative tax credit proposals which give tax credits to people who don't pay any taxes, this exception could actually be used to further a new-age entitlement plan. Under Willie Brown's exception, a full-scale tax hike and subsequent redistribution of money could easily be achieved with a simple majority vote.

The California Supreme Court has warned that opponents of Proposition 13 have and will "cut a hole in the financial fence which the people in their Constitution have erected around their government. Governmental entities may be expected, instinctively, to pour through the opening, limited only by their ingenuity."

It is time to plug the opening that Willie Brown's ingenuity created 16 years ago. No more tax increases should ever be approved without a two-thirds vote. Those tax increases, which were illegally imposed over the years, should be rescinded and equity should be established. As John Marshall, the first Chief Justice of the U.S. Supreme Court, wrote, "An act of the legislature, repugnant to the Constitution, is void." Even Willie Brown, the Imperial Speaker himself, cannot change this self-evident truth.

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