As written, Proposition 26 would recategorize many local government fees and charges as taxes, subjecting them to the approval requirements of special taxes, including two-thirds supermajority voter approval. With some limited exceptions, a tax would include any charge that provides benefits or privileges to those not charged.
Finally, it would expand the supermajority approval requirement for state taxes by requiring two-thirds supermajority approval of each house of the Legislature for “any change in state statute which results in any taxpayer paying a higher tax.”
According to the California Budget Project (CBP) analysis, the following would be exceptions:
- Charges where the feepayer receives a service, product, benefit, or privilege that non-payers do not receive. The amount of the fee may not exceed the “reasonable costs” to the state or local governments of providing the service, product, benefit, or privilege.
- Charges imposed for entrance, use, purchase, or lease of state or local government property.
- Penalties, fines, or other monetary charges resulting from a violation of the law and imposed by the courts, the state, or a local government.
- Charges imposed for “reasonable regulatory costs” related to issuing a license or permit; performing investigations, inspections, and audits; and related enforcement activities.
- Charges imposed by local governments as a condition of property development, so-called developer fees.
- Assessments and property-related fees as defined in the state’s Constitution.
Furthermore, the burden of proof would be placed on the state or local agency proposing the charge, should a taxpayer challenge the measure.
What is the difference between a fee and a tax? The CBP argues that has never been clear and the lines are frequently blurred. Indeed, “The courts have recognized that the difference between a “fee” and “tax” is frequently “blurred. In general, however, taxes support the general operations of government, while fees are related to a particular use or benefit.”
In general, fees are charges imposed to recover the cost of providing a service to the fee payer,” the CBP continues. “The charges “reasonably” reflect the value of the government’s cost to administer the program and the benefits the feepayer receives in exchange.”
As Michael Coleman from CaliforniaCityFinance.com argues, “A statewide initiative on the November ballot would create years of litigation and havoc in municipal finance.”
“State and local governments are frequently tasked with mitigating the effects on the public of the social, environmental and economic impacts created by individuals and businesses,” he argues.
“By reclassifying certain fees as taxes, Proposition 26 would also limit the ability of state and local governments to place the costs of programs and services on the individuals and businesses responsible for those adverse impacts,” he continued.
That does not mean that the taxpayers will not bear the burden. Many of these costs are unavoidable.
“Instead,” he argues, “the cost burden would shift to taxpayers as a whole, unless voters, by a two-thirds supermajority, approve of special taxes on those individuals or businesses.”
The measure has been labeled as deceptive by some opponents who argue that the measure is backed by all of the same big oil companies who are also backing Prop 23.
The top contributor to the Proposition 26 campaign is the Chevron Corporation with a donation of $3,750,000 to date. Other major contributors are big tobacco company Philip Morris USA Inc. ($1,750,000) and Anheuser-Busch Companies, Inc. with a contribution of $925,000.
Health and Environmental groups are especially concerned because of the potential for the initiative to inhibit the state and local governments’ abilities to force industries to be responsible for the environmental costs of their businesses.
Writes the Sierra Club, “Large companies whose products negatively impact society have spent over $17 million (and counting) to pass Prop 26 because it would eliminate their financial responsibility to deal with the side effects of polluting our air, dirtying our water, and endangering our health. Without the fees currently in place, the burden of paying for necessary services such as pollution regulation and health care would then fall upon all taxpayers, at the amount of over $1 billion per year.”
This, in fact, would not save the taxpayers money, but rather be a savings to big business.
The San Jose Mercury News, in their opposition to the intuitive said, “Sponsored largely by oil, tobacco and alcohol companies, Proposition 26 has been called the Polluter Protection Act — an apt moniker.”
The LA Times added, “Proposition 26 goes much too far, making it extremely difficult to charge businesses for the damage they cause and instead sending the bill to everybody else.”
Health groups are also in opposition. The American Cancer Society argues it “…would place the financial burden on…taxpayers, for cleaning up or mitigating cancer-related damages caused by a particular company(ies).”
While the American Lung Association of California adds, “Prop 26 chips away at the premise that polluters pay for the public health, environmental and social costs associated with their production and make it nearly impossible to adopt fees that will help reduce air pollution or help people quit smoking.”
California Consumer Federation argued, “Prop 26 would cut our schools to pay for an oil industry bailout, and cut our public safety to pay for a tobacco industry bailout.”
They add, “Proposition 26 would create new hurdles that make it nearly impossible to charge polluters, tobacco companies and other corporations for the costs of preventing or repairing the harm to the environment or our health and safety that their business activities cause.”
While many recognized the problems in Proposition 23 early on, only lately have groups recognized the pitfalls of Proposition 26.
—David M. Greenwald reporting