Legislative Update

Committee Approves Legislation to Reduce Vote Threshold for Local Taxes

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Legislation overturning critical provisions of Proposition 13 by lowering the vote threshold for local special taxes was approved July 12 by the Assembly Local Government Committee.

ACA 1, by Assembly Member Cecilia Aguiar-Curry, would reduce the vote threshold for local transactions and use taxes, parcel taxes, and general obligation bonds from two-thirds to 55 percent if those taxes finance local infrastructure.

CalTax opposes the proposed constitutional amendment, noting that the measure’s definition of “public infrastructure” – any project relating to water infrastructure, wastewater treatment, protection from sea-level rise, open space, parks and recreation, flood control, broadband internet access, and other things – is so broad that local governments could use a lower vote threshold for most proposed tax increases.

While proponents said ACA 1 would not increase taxes, they also argued that it would pave the way for more voter-approved local tax increases to fund local projects.

CalTax Vice President of Policy Peter Blocker noted the incongruity of the two claims, telling the committee:

“While we understand there may be frustration trying to pass some local taxes, we think it’s important to remember that the taxes this measure would make easier to pass are regressive taxes. Proponents have argued the measure before you would not increase a single tax, but it’s also stated the purpose is to lead to more taxes being passed. So as intended, ACA 1 will lead to higher local taxes in California, and we ask that you consider what impact these taxes will have on the cost of living and cost of doing business in the state.”

An analysis by the California Tax Foundation found that ACA 1 could increase local taxes by $255 million annually.

CalTax noted that the two-thirds threshold for local special taxes – a taxpayer protection established by Proposition 13 – has widespread support from California residents, according to several polls.

Members of the committee questioned whether the author had considered adding oversight provisions, including a mandatory sunset date for any tax subject to the lower vote threshold.

Assembly Member Diane Dixon, a Republican who represents a district in Newport Beach, said she opposes ACA 1.

“There are always attempts to undo Proposition 13 and the two-thirds vote,” Dixon said. “It’s just a pincer attack against the decades of the two-thirds requirement to increase property taxes.”

Despite concerns raised by CalTax and a coalition of business groups – including the California Chamber of Commerce, California Manufacturers and Technology Association, Family Business Association, and others – the committee members voted 6-1 to advance the measure.

As a constitutional amendment, ACA 1 requires approval from two-thirds of the Assembly and Senate to be placed on the statewide ballot (with no opportunity for the governor to sign or veto the legislation), then would need the approval of a simple majority of voters to be adopted.

In other action by the committee:

Legislation Creating New Local Taxing Authority Passes. The committee voted 6-1 to approve SB 440 (Skinner), authorizing two or more local governments to establish a regional housing authority for the purpose of increasing the supply of affordable housing – and authorizing such an authority to impose a parcel tax, gross receipts tax, special business tax, and documentary transfer tax, as well as issue general obligation bonds and impose commercial linkage fees if approved by voters.