Nineteenth century lawyer and newspaper publisher, Gideon J. Tucker, once said that “no man’s life, liberty or property are safe while the Legislature is in session.” Well, the California Legislature is back in session and no truer words have ever been spoken. And, while we’re still waiting on a thousand or so more bills to appear in print, there are already several major concerns to taxpayers, and even a few direct threats to Proposition 13.
Here are just two: ACA 1 and ACA 3.
Assembly Constitutional Amendment 1 is a perennial attack on Proposition 13. Year after year it is re-introduced and each time California taxpayers rise up and defeat it. Still, it’s a recurring threat that shouldn’t be taken lightly, and taxpayers need to remain vigilant. Bad bills pass all the time and we never know when some deal may be struck that sees ACA 1 sail through. That is especially true in this new legislative session, with a new crop of progressive representatives.
All Californians should be deeply concerned about ACA 1 because it would make it easier to raise taxes by lowering the voter approval requirement for local bonds and tax increases from the current two-thirds down to 55 percent if the money would be used for “public infrastructure” and certain types of public housing projects. Proposition 13 mandates a two-thirds voter approval for all special taxes, but ACA 1 would wipe out that protection for nearly all local taxes because the category of “infrastructure” is so vague that it covers almost anything.
In 2000, voters lowered the threshold needed to approve school bonds from two-thirds to 55 percent based on the promise that all California’s problems with education would be cured. How did that work out? California’s test scores are still at the bottom even as per-pupil spending skyrockets.
These are below-the-line exactions that are added to property tax bills above and beyond Prop. 13’s one percent cap. That’s why Prop. 13’s two-thirds vote requirements for all special taxes is so important.
Assembly Constitutional Amendment 3 would gut Proposition 13. It would allow the Legislature to raise taxes statewide with a simple majority vote of each house instead of the constitutionally required two-thirds vote established by Prop. 13. It would also allow the Legislature to define “wealth” to include unrealized capital gains in real estate, meaning the government would be empowered, by a simple majority vote, to create a new annual tax on the current market value of a home or other property.
While the “whereas” clauses in the preamble of ACA 3 recite talking points about rich people escaping taxation and that a new tax on “extreme wealth” will restore fairness to the state’s tax system, nothing in the measure, a proposed amendment of Article XIII, Section 2 of the California Constitution, limits the Legislature to taxing only rich people or “above-average” wealth.
Currently, Section 2 constitutionally limits its taxing authorization to “personal property” that is “tangible.” ACA 3 would remove both of those limits and would authorize “the taxation of all forms of … wealth, whether tangible or intangible.”
That means the Legislature could define “wealth” to include equity in real property that is not fully taxed through property taxes due to Proposition 13. The Legislature could also define “wealth” to include equity in investment securities, based on their current market value, which today would not be taxed until a capital gain is realized upon sale. Anyone who owns a home or has a retirement account is threatened by ACA 3.
ACA 3 also removes another important taxpayer protection known as the Gann Limit. This voter-approved limit on the growth of spending by state and local governments would be defined out of existence. The Gann Limit generally requires government entities to restrain their spending to conform to the growth of inflation and population. It was intended to prevent runaway government spending.
Don’t be fooled. Although proponents say ACA 3 is part of a new “wealth tax” on the super-rich, and its companion legislation, Assembly Bill 259, affects only the ultra-wealthy, ACA 3 contains no such limitation. The Legislature could easily move those brackets down to hit average California homeowners at any time – and if they can do it, sooner or later, they will.
Jon Coupal is president of the Howard Jarvis Taxpayers Association.
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