The tax and fee scheme dreamed up by legislative Democrats and probably soon to be signed into law by Gov. Schwarzenegger is rightly called the “nuclear option” because it blows away legislative Republicans by allowing tax increases to be passed with a majority vote. This is probably the first step in rendering Republicans powerless because the Democrats are sure to come up with a way to get around the two-thirds budget vote as well.
This is nothing new – it has been around for a long time. It was just never triggered until now. Here’s how it works: Democrats are raising sales, income and oil company taxes but lowering the gas tax, thus creating a “tax neutral” situation. Their lawyers tell them this does not trigger the constitutional two-thirds vote requirement for tax increases, it can be done with a majority vote. Democrats then replaced the gas tax with a 39 cent per gallon “fee.” “Regulatory fees” are majority vote thanks to a 1997 court case called Sinclair Paint. In 2000, business tried to pass an initiative to disallow majority vote fees but it failed.
Anti-tax folks expect the courts to rescue them from these new taxes/fees but they can probably forget it. There are three reasons: First, courts follow the election returns. Democrats won the 2008 elections; they have reduced Republicans to the districts gerrymandered for them. There is no political price for raising taxes, and the judges know it. Second, courts are very leery about telling legislators how to do their business, how many votes it takes to pass a law. If the legislature and the governor agree this plan is legal, the courts are unlikely to interfere. Third and most important, judges know who pays their bills. They are not going to bite the hand that feeds them. They know who appropriates their budgets.
The only remedy for Republicans and business interests is to file a referendum against the Democratic plan. Here is an interesting catch-22. A referendum cannot be filed against a “tax levy.” But the Democrats insist the tax plan is “revenue neutral,” not a “tax increase” – read “tax levy.” Republicans should file a referendum against both the tax and fee schemes. A referendum on a majority vote fee bill would seem legal beyond question, but Democrats may combine the fee and tax sections into a single bill and claim the whole thing cannot be referred.
Fighting over the referendum power and the definition of a tax levy would be much stronger than fighting over the two thirds vote. It would also force the courts to act, where obviously they would like to skirt the whole issue.
Republicans and their anti-tax allies should count on one thing: if the Democrats get away with the majority vote tax/fee shuffle, they will reconstitute the budget into a majority vote bill and kill off the two-thirds budget requirement. Thanks to the tax scheme, Republicans face the danger of near total irrelevance. If it also can be applied to the budget, there will be no question of their total irrelevance.