Initiative Update

Taxpayer Protection Act and Split-Rate Property Tax Hike Are Among Latest Initiatives Filed

The California Business Roundtable filed an initiative October 1 called the Taxpayer Protection Act – a proposal that would increase voters’ power over taxes by, among other things, requiring statewide voter approval for any tax increase approved by the Legislature and governor, and prohibiting state agencies from imposing taxes or tax-like regulations unless approved by the Legislature and the voters.

The measure (Initiative 21-0026) also would end the “pay-to-play” requirement for litigating taxes in specified circumstances, and would require a two-thirds vote for all local special taxes to address loopholes created by the Upland precedent.

Other local tax provisions in the measure include required uniformity for parcel taxes, consolidation of timing in local tax elections, and a prohibition against government entities campaigning for tax measures.

Additionally, the measure would require government entities to tell voters how the money from a proposed tax would be spent (including information on the duration of time the tax would be in effect, a limitation on how the revenue could be spent, and if the tax is to be for unrestricted general revenue purposes, a statement to that effect must be included).

The measure also provides that the retention of revenue by or the payment to a non-government entity shall not be a factor in determining whether or not a charge is a tax, and that the characterization of a tax or fee as being voluntary or paid in exchange for a benefit, privilege, allowance, authorization, or asset shall not be a factor in determining whether it is a tax or exempt charge.

The proposal entered a 30-day public comment period. The proponent can amend the initiative during this time and the five days after the comment period ends. The attorney general will prepare the circulating title and summary, which typically takes approximately two months, and the Legislative Analyst’s Office will prepare a fiscal impact estimate. Once proponents are cleared to circulate petitions for signatures, they will have 180 days to collect signatures.

In related news:

Two Initiatives Would Impose a Split-Rate Property Tax Surcharge. The Service Employees International Union (SEIU) United Healthcare Workers West recently filled two separate measures that would impose a split-rate property tax increase.

Both measures would increase the property tax rate on commercial, residential, industrial, vacant, and mixed-use real property with “full cash value” of $4 million or more, and properties valued at $5 million or more would face an even steeper rate. Exemptions are included for commercial agriculture property, protected open spaces, properties restricted by deed for low-income occupants, and others.

Initiative 21-0032, filed October 6, would impose a 0.7 percent property tax surcharge (flexible and increasing up to 0.9 percent to meet “state funding needs”) to fund personal income tax relief to select groups of taxpayers. The measure would provide income tax credits of up to $2,000 for heads of household, married couples filing jointly, married couples filing singly, and surviving spouses if they earn $400,000 or less, and income tax credits up to $1,000 for single tax filers earning $200,000 or less.

For each taxable year beginning on or after January 1, 2024, the credit and adjusted gross income amounts would be adjusted annually for inflation, not to exceed 2 percent for any given year.

The other measure, Initiative 21-0023, filed September 23, would impose a “surcharge” of “1.2 percent or more” on property with “full cash value” of $5 million or more, and a lower rate on property in the $4 million to $5 million range, “equal to the applied surcharge level divided by $1 million multiplied by the difference between the full cash value and $4 million.”

The measure also would increase the property tax exemption for a principal residence from $7,000 (the amount that has been in place since 1972 and has not been adjusted for inflation) to $200,000. This would translate to a $2,000 property tax break for many California homeowners rather than the existing $70 break.

Legislative proposals to increase the homeowners’ exemption have been introduced numerous times since the 1970s, but have been opposed by the California Teachers Association and other public employee unions because the change would reduce government revenue.

The initiative also would provide a personal income tax credit for income-qualified renters in an amount not less than $2,000 for spouses filing joint returns, heads of household, and surviving spouses, and in an amount not less than $1,000 for others. These amounts would be increased annually for inflation, not to exceed 2 percent in any year, and the Legislature would be required to reimburse local governments for revenue lost from this exemption.

Initiative Would Ban Specified Forms of Energy Production. Initiative 21-0028, filed October 4, would ban the issuance of permits to conduct hydraulic fracturing or other well-stimulation treatment beginning May 2023. For entities authorized to operate oil or gas wells before 2025, the amount extracted would be regulated incrementally beginning in 2027 until being prohibited in 2045. State agencies would be prohibited from using coal after 2025, and all fossil fuels would be prohibited after 2050. Operation of an oil or gas well within 2,500 feet of a hospital, residential area, or place of education would be prohibited.

Measures Filed to Protect Businesses From Lawsuit Abuse. The Civil Justice Association of California filed three measures October 6 aimed at improving the state’s legal system by reducing abuse of the system and reducing the costs for businesses to defend themselves against meritless suits:

  • Initiative 21-0029 allows a 60-day window to resolve disputes prior to filing suit. The measure would amend the Code of Civil Procedure to create a 60-day window for injured consumers and others to obtain recovery from whomever harmed them before filing suit. If injured consumers are unable to obtain recovery during the 60 days, they may bring suit, but their lawyers’ fees will be limited to no more than 20 percent of the amount the consumers recover. If the amount recovered is paid pursuant to a statutory claim that also provides for a court to award attorney fees to a claimant’s attorney, the claimant shall either choose to pay fees pursuant to the contingency fee contract from the amount recovered, or authorize the attorney to seek a contingency fee award from the court, but not both.
  • Initiative 21-0030 limits lawyer contingency fees for tort or statutory claims. The measure would amend the Business and Professional Code to state an attorney shall not contract for or collect a contingency fee in excess of 20 percent of the amount recovered for the claimant from a tort claim or statutory claim.
  • Initiative 21-0031 limits lawyer contingency fees for tort claims. The measure would amend the Business and Professional Code to state an attorney shall not contract for or collect a contingency fee in excess of 20 percent of the amount recovered for the claimant from a tort claim.

Measure Would Authorize $1.9 Billion in Bonds for Brownfield Site Cleanups. Initiative 21-0034, filed October 7, would authorize $1.9 billion in bonds to clean “brownfields” – properties for which the expansion, redevelopment, or reuse may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant. The largest allocation of the statewide bond funds – $800 million – would be used to clean sites in El Monte, Cardon, Norwalk, Richmond, and Newport Beach. The allocations also include $200 million would be used for assessing, investigating, and cleaning up school sites.

Initiative Would Change Process for Wage Disputes. Initiative 21-0027, filed October 4 by the California New Car Dealers Association, would amend the Labor Code to provide that in wage disputes, the state should guarantee full, fair, and swift recovery for employees without the need to hire a lawyer or go to court. The initiative would create and maintain a Consultation and Policy Publication Unit for the purpose of providing information, advice, and assistance to employers, employees and other members of the public. Proponents say harmed employees would be awarded 100 percent of monetary penalties, as opposed to the current 25 percent after attorney and filing fees. Existing statutory penalties, as well as the civil penalties imposed by this initiative, would be doubled for companies that willfully violate employment laws.

Measure Proposes Ban on Vaccine Mandates and Fluoridated Water Supplies. Initiative 21-0025, filed September 29, would amend the Health and Safety Code to state that immunizations can be refused for medical, religious, or philosophical beliefs that need not be explained. The measure states that all Californians have the right to make free and informed health decisions, and no device, medical procedure, or pharmaceutical product shall be forced and no person shall be discriminated against for not partaking. The initiative also would provide that lithium, pharmaceuticals, or fluoride may not be added to any water supply.

Proposal Would Strengthen Constitutional Right to Education. Initiative 21-0033, filed October 7, amends the state constitution to state that all public-school students shall have the right to a high-quality public education and any law, regulation, policy, or official action pertaining to public education that does not put the interests of students first shall be deemed to deny this right. The initiative states: “The remedies to enforce this right to a high-quality education shall be limited to invalidating, or otherwise enjoining, the offending law, regulation, policy, or official action. The remedies for this right shall not include new mandates for taxes or spending.” The California Constitution already has provisions interpreted to provide that education is a fundamental right in this state, but not with the specificity included in this initiative.

Proponents Fail to Qualify Measure Providing Right to a Jury Trial in Child Custody Cases. Initiative 21-0001, which sought to allow parties to demand a jury trial in child dependency and child custody court proceedings, failed its signature-gathering deadline October 11. Proponents Wylmina Hettinga and Stephen D. Konnoff have an almost identical measure, Initiative 21-0019, pending review by the attorney general.

Proponents Withdraw Measure Requiring Earth Sustainability Education in Schools. Initiative 21-0002, which sought to require that every public school provide each teacher and student with 30 hours of “healthy Earth sustainability education” every two years, was withdrawn by its proponent October 13. The cost to taxpayers estimated by the Legislative Analyst’s Office was “up to the low hundreds of millions of dollars annually to hire substitute teachers while teachers receive training and provide trainers for teachers.”