Business Community Should have Before – and Should Now – Consider Supporting a Referendum on Taxes

Joel Fox
Editor of Fox & Hounds and President of the Small Business Action Committee

This is an I-told-you-so column. I’m sure we can dig up a number of columns where my projections were wrong, but today, given the results of the election, I’m bringing back a column from July 7, 2011.

I urged the business community to consider seeking a change in the state constitution to allow referendums on taxes.

Under a headline: “A Constitutional Change Taxpayers and Businesses Should Pursue,” the columns first two paragraphs read:

As 
taxpayers and businesses consider the political landscape during and after the
 coming election year, they might want to think about making a small but 
powerful change to the state constitution. Article 2, Section 9 (a) grants the 
people referendum power to challenge bills passed by the legislature and signed 
into law by the governor. However, the constitution prohibits the use of
 referendums for tax levies. Excising that prohibition from the constitution
 would add an important taxpayer protection by potentially giving voters the 
final say over taxes.

In the next election cycle, a major push will be made to get enough tax 
friendly politicians elected to the legislature to scale the two-thirds vote 
barrier required to levy taxes. Democrats think that capturing two-thirds of 
both houses of the legislature is possible in the next election. They may be 
right.

Turns out they were right and the supermajority is in place. That supermajority could determine that the recent tax increases are not enough to meet demands and make up for past spending cuts.

Already the cry for more revenue is being heard from union supporters. The Sacramento Bee reported: Immediately after the election, Art Pulaski, executive secretary-treasurer of the California Labor Federation, said Californians “need to take a hard look” at corporate tax breaks. Joshua Pechthalt, president of the California Federation of Teachers, said passage of Brown’s tax measure was “only Step 1. California public education continues to be underfunded.”

Taxes on oil or sugary drinks or cigarettes or other products and services have been suggested in the recent past. In my July 7, 2011 column I noted a march conducted by public union members in which they had a list containing $40 billion in potential tax increases.

Individual industries in the business community seem ready to stand against tax increases that directly affect them when those tax increases appear on the ballot. Witness both the opposition to Proposition 29, the cigarette tax, and Proposition 37, the food labeling measure opposed by chemical and grocery industries.

However, the legislature does not have to go to the ballot if it passes a tax or fee with a two-thirds vote and the governor signs on. In his post election news conference, while the governor said he was not eager to look at new taxes, he also pointed out he was not drawing a line in the sand.

There was little discussion about fees, also requiring a two-thirds vote, from either the governor or legislators.

For businesses to oppose new taxes or fees coming out of the legislature they could attempt to qualify an initiative, but the tax or fee would go into effect first. A referendum would freeze the tax or fee until the people decided at the ballot.

But, the referendum tool for taxes is not currently in the toolbox.

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