Public agencies in California are awash in billions of surplus tax dollars. At the state level alone, the surplus figure is between $10 billion and $13 billion. In this circumstance, it is remarkable that taxpayers are forced to fight against tax increases. But a loophole created by the California Supreme Court threatens to impose additional costs on consumers and businesses in the form of government-imposed “fees.”
Closing the so-called “Sinclair loophole” to Proposition 13 is the most important step towards taxpayer protection that voters can make this November. Businesses and Taxpayers for Fair Fees, a growing statewide coalition in which the California Taxpayers Association is proud to play a role, is sponsoring a ballot initiative to prevent unrestrained taxation of Californians.
The 1997 Sinclair decision punched an enormous hole in Proposition 13. It gave state and local governments sweeping authority to levy tax-like fees that affect business and individuals in California without a popular vote for local taxes and without a two-thirds legislative vote for state taxes. Sinclair damages taxpayers by wiping out taxpayer protections and exposing businesses to vast new array of tax-like fees.
Fees and assessments are now a larger cost to taxpayers in California than property taxes, sales taxes or income taxes. These taxpayer exactions by state and local government are growing and represent a cost of $25 billion per year.
Under the Sinclair decision, the Legislature will no longer be required to reach a two-thirds vote to approve new taxes. New taxes can simply be defined as fees and be scored as majority-vote bills, as long as some form of harm can be found to justify the fee.
The possibilities for harmful new taxes, masquerading as fees, are endless and absurd. New levies can be imposed on any product that could have an adverse impact on anyone. Tax-like fees can be imposed on everything from chainsaws to automobiles and computer terminals. This decision exposes every manufacturer in the state of California to huge new tax liabilities, but the impact isn’t limited to manufacturers. Any company or group could be tagged for “mitigation fees” based on some activity that affects third parties, society in general, or the environment.
Fees and other non-tax revenues are responsible for returning our tax burden to a pre-Proposition 13 level. The growth in fees and other non-tax revenues has been so aggressive and constant in the past 20 years that these revenues have erased the reductions in tax burden caused by Proposition 13. Counting taxes, fees, assessments, fines and other charges, Californians pay more than 16% of their income to state and local government , virtually equal to the level of taxation that spawned the tax revolt.
Californians must restore fairness to our tax code by voting “yes” on the “Stop the Hidden Taxes” initiative. We welcome any businesses, organizations, and individuals who are interested in joining our fight to preserve taxpayer protections.
McCarthy is president of Sacramento-based California Taxpayers’ Association.
