Stop hidden taxes! That was the clear and compelling message
that California voters sent to lawmakers with passage of Proposition 26 in
November. This measure was designed to halt the practice of governments imposing
new taxes without the constitutionally required vote, by falsely labeling them
as "fees," "surcharges," and with other deceptive names.
Under Proposition 26, all proposed new charges by state and
local governments must undergo a tax test to determine if they are legitimate fees
that require only a majority vote of the Legislature or approval of a local
government body for implementation, or are actually taxes that require a
two-thirds vote of the Legislature or a vote of the people at the local level.
Proposition 26 establishes five criteria for this tax test.
For example, if a charge benefits those who don’t pay for it, it is a tax.
The California Taxpayers Association recently completed an
analysis of Proposition 26 as part of our effort to make sure the initiative is
implemented as voters intended (Understanding
Proposition 26: A Sponsor’s Guide to California’s New Tax Structure). The
report provides lawmakers and taxpayers with a step-by-step guide on how to determine
if a new assessment is a tax or a fee.
Unfortunately, as we’ve begun to apply the Proposition 26
tax test, we’ve found that the practice of imposing hidden taxes is still alive
and well. One example is SB 791, a bill by Senate President Pro Tem Darrell
Steinberg that would give regional transportation agencies the power to impose unlimited
new gasoline taxes without the required two-thirds vote. SB 791 would force
California drivers to pay billions of dollars in new gas taxes, leading to significant
hardship, especially for small businesses and low-income families.
Because this legislation would result in taxpayers paying
higher taxes at the pump, it clearly requires a two-thirds legislative vote
under Proposition 26. However, the Legislature is proceeding as if this
requirement of the state constitution does not exist.
If lawmakers pass such tax bills masquerading as fees, this
could lead to a stampede of hidden tax bills in future legislative sessions. In
addition, the hidden tax contagion is spreading to local governments, with some
cities and counties proposing ways to circumvent the will of the voters.
This is exactly what voters did not want to happen. They
passed Proposition 26 because they want to close loopholes and improve government’s
accountability to taxpayers – the people who foot the bill. Hidden taxes ultimately
mean higher costs to California families and employers – and with families
still struggling in this recession, a bigger tax bill is the last thing they
Hidden taxes also mean lost jobs as companies are forced to
pay the government instead of their workers. Forcing more job cuts doesn’t make
any sense, especially with the unemployment rate higher than 12 percent in
California, representing more than 2.1 million people out of work.
We understand that lawmakers face a lot of pressure to
increase revenues. But there is a right way and a wrong way to do this, and
violating the state constitution is most certainly the wrong way.
We urge lawmakers to use our Proposition 26 Tax Test to make
sure they are following the process that voters approved to increase
accountability, and spare Californians the burden of higher taxes at the worst
Teresa Casazza is
president of the California Taxpayers Association, a nonprofit, nonpartisan
organization founded in 1926 to protect taxpayers from unnecessary taxes and to
promote government efficiency. CalTax is online at www.caltax.org.