A history of California’s tax initiatives

On December 5th, Governor Jerry Brown filed an initiative with the California Attorney General’s office which, if passed, would impose a variety of new taxes with the aim of raising nearly $7 billion in revenue. This money would be dedicated funding for education and public safety programs, which have seen enormous cuts as a result of the recent and ongoing budget crisis. If approved by the voters, the initiative would institute two new taxes. First, individuals making $250,000 or more would pay up to 2% higher income taxes for five years, and second, the state sales tax would be temporarily increased by 0.5%, up to 7.75%, through 2017.

The following day, state anti-tax groups, organized by the Small Business Action Committee and Howard Jarvis Taxpayers Association, filed their own ballot measure aimed at curbing spending. This measure would freeze future state spending levels at fiscal year 2010-11 base rates, which are a full thirty percent lower than they were three years ago, with an allowance for increases in population and inflation. The proposal would also require that any additional revenues be used to pay off the debt, and in better times given to schools and returned to the taxpayers. If both measures are approved by voters in November, the increase in revenue from Brown’s initiative may be diverted from its intended recipients by the revised spending cap.

A host of other tax related initiatives have already been filed as well. They include: a progressive increase in income taxes aimed at raising $10 billion for schools filed by civil rights attorney Molly Munger, a broadening of the sales tax to include services by the Think Long Committee, and a millionaires’ tax increase supported by the California Federation of Teachers.

In light of this, it is useful to review that the tax restriction initiatives passed by California voters, dating back to Proposition 10 in 1914, which amended the Constitution to abolish poll taxes and head taxes. Head taxes refer to a tax of a set amount on individuals and poll taxes refer to such a tax that is required to vote. The initiative passed with 52% of the voters’ support.

Perhaps the most famous of California’s tax initiatives, Proposition 13 in 1978 amended the Constitution to roll back property taxes to 1975-76 levels. It limited taxes on real property to 1% of value, limited annual increases of value, and provided for revaluation upon sale or certain other occurrences. It also required a two-thirds vote of the Legislature to raise state taxes. Proposition 13 received 65% of the vote.

Voters passed three initiatives in 1982 relating to taxes. Propositions 5 and 6 both passed with 62% of the vote and repealed gift and inheritance taxes. Proposition 7 received 64% of the vote and required that the state income tax be fully indexed to inflation.

Proposition 62 in 1986 required two-thirds of voters to approve raising local special taxes and a two-thirds vote by the local government and a majority of voters to raise local general taxes. It applied retroactively to some taxes imposed after August 1, 1985. The initiative passed with 58% of the vote.

Proposition 163 in 1992 repealed the snack tax, with 67% of the vote.

In 1996, Proposition 218 amended the Constitution to restrict the ability of local governments to impose fees, assessments and general taxes. It required voter approval for certain tax increases and passed with 57% of the vote.

Proposition 26 is the most recent tax initiative and was passed in 2010, by 58% of voters. It amended the constitution to require that certain state fees be approved by a two-thirds vote of the Legislature and that certain local fees be approved by two-thirds of voters. It also increased the legislative vote requirement to two-thirds of the Legislature for certain tax increases that had previously been subject to only a majority vote.

As discussed above, voters have sometimes but not always approved broad-based tax cuts and limitations on tax increases. Voters have also in some cases passed initiatives which raised taxes, but in those cases the measures tended to target narrow groups of taxpayers and earmarked revenues for popular programs, for example raising income tax rates on the wealthy or increasing cigarette taxes to fund health programs. Importantly, when there are a number of tax related initiatives on the ballot, voters have tended to vote no on all of them. This presents a tough hurdle for Brown and those who have proposed similar initiatives to overcome next November.

All information on the history of California tax initiatives is taken from the Miller- Rose Institute Initiative Database.

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