The battle between business and labor is heading this week toward a high-stakes showdown before the California Supreme Court over a ballot measure that would tip the balance of power at the state Capitol.
On Wednesday, the court will hear oral arguments on the legality of an initiative backed by business interests that strips the state Legislature and governor of the ability to raise taxes and requires voter approval nationwide. the state.
In an effort to overturn the measure, Governor Gavin Newsom and Democratic lawmakers asked the Supreme Court to intervene last September. They argued that the change revises the California Constitution and, therefore, can only be placed on the ballot if ratified at a constitutional convention or by winning a two-thirds vote in the Legislature .
The proposal alarmed Democrats, labor unions and their liberal allies. The measure could limit state and local funding, hamper the ability to generate new funds for programs, and make it more difficult for the governor and legislature to offset a budget shortfall in an economic crisis without reducing progressive political priorities.
“They should be scared because Californians have had enough,” said Rob Lapsley, president of the California Business Roundtable, a supporter of the measure. “This gives California residents the right to vote on future taxes, and voters will support it if it appears on the ballot.”
If approved by voters, the proposal would mark a historic victory for the business community. Lapsley said establishing new checks and balances on taxation is key to creating jobs and attracting businesses to California.
Unions representing public workers, teachers, police and firefighters joined forces with Democrats and dozens of other organizations to ask the high court to overturn the measure. They argue it would harm essential government functions and threaten services that rely on state dollars.
“I want to make it clear that the ‘Taxpayer Deception Act’ allows wealthy corporations, who can afford expensive campaigns, to block taxes on their industry while ordinary Californians, everyday people, bear more of the cost of essential services,” said Tia Orr. , executive director of the Service Employees International Union California, which is leading the charge to defeat the measure on the ballot.
Officially dubbed the “Taxpayer Protection and Government Accountability Initiative,” the measure promoted by Lapsley’s group and the Howard Jarvis Taxpayers Assn. asks voters to require local governments to vote on all tax increases, which can now be approved administratively. The threshold for increasing special local taxes would go from a majority to a vote of two-thirds of the population.
State-level fee increases, which are often approved by state agencies and boards, would require support from a majority of the state Legislature. The measure would expand the requirements necessary for a statewide tax increase, which can currently be done with a two-thirds vote of the Legislature. Under this ballot measure, the support of a majority of California voters would also be required.
Taxes are often applied to the sale of goods or income, for example, and fund various government expenditures through the state’s general fund. A fee is usually collected and spent for a more specific service.
The measure broadens the definition of taxes and restricts the potential use of fees to cover only the cost of the service, potentially prohibiting the government from redirecting revenues to other purposes to close a budget deficit. The changes would take effect retroactively and reverse many local and state tax and fee increases approved since January 1, 2022.
Carolyn Coleman, executive director of the League of California Cities, said the new requirements for local ballot measures would effectively wipe out more than 100 measures that voters have already approved by majority vote. In Walnut Creek, for example, it would undo a local public safety measure that voters approved by a 65% majority in 2022. The measure funded five new police officers, she said.
Opponents and supporters said that, if approved, the taxpayer ballot measure could undo the “residential tax,” also known as the ULA measure, that took effect in Los Angeles last year. The measure applies a 4% fee on all property sales over $5 million and a 5.5% fee on sales over $10 million to fund housing and anti-corruption initiatives. ‘roaming.
Lapsley argued that the real estate tax is “singularly the worst economic policy one could have to freeze the entire commercial, retail and residential real estate market in Los Angeles.”
The luxury real estate market has slowed since the measure was passed, but the measure also raised about $215 million in funding in its first year.
Groups that have donated money directly to Lapsley’s campaign, or funded other political action committees that contribute to the measure, include developers, landlords and property managers, among others, interested in ending to the tax on real estate properties.
In addition to determining whether the national ballot initiative constitutes an overhaul of the Constitution, the Supreme Court will consider the argument that it affects essential functions of government.
Erin Mellon, Newsom’s spokeswoman, said that in the event of a financial crisis, the measure would force the government to wait up to two years before the next election to raise taxes, “potentially putting lives and our economy at risk.” “.
“The governor is not a fan of tax increases and has fought against proposals to add new taxes, but the recession 15 years ago – and the current budget challenges facing our state – underscore the need for government to use all tools at its disposal to respond to crises,” Mellon said in a statement. “The California Supreme Court should exclude this radical effort led by wealthy business interests from the ballot because it violates the Constitution by attempting to completely restructure our system of government in a way that will prevent the government from protecting Californians from future crises. “
This case elevates the ongoing fight between progressive labor and business from the halls of the state Capitol to California’s highest court.
California businesses often complain they can’t get a fair share in a state legislature dominated by Democrats and under the powerful political influence of unions. Business interests are increasingly turning to the statewide ballot to block and prevent progressive laws from taking effect, or to push their own political agenda directly to voters.
The proposed ballot measure could deal a blow to unions and other interest groups, who would find it harder and more expensive to convince voters to raise taxes to support their political agenda than to make their case solely to legislators. Requiring lawmakers to pass bills to increase each new entitlement could also become a political challenge.
Lapsley and others said it’s rare for the Supreme Court to take up this type of pre-election challenge to a ballot measure. He said he felt it was right for the court to consider the arguments, but he criticized Democrats for bringing the case.
“The fact that the Legislature and Governor are using taxpayer dollars to attempt to deprive California voters, more than 1.43 million people who signed our petitions, of the opportunity to make their voices heard is a direct violation of everything they talk about in terms of direct engagement. democracy,” Lapsley said. “They are completely hypocritical in this matter.”
Each side has 30 minutes to present its arguments before the Supreme Court on Wednesday in San Francisco. The court is expected to issue its ruling sometime before the June 27 deadline for the measures to be eligible for the ballot.
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