The Madness of Proposition 26

In November 2010, the California electorate approved Proposition 26, a little-known and little-followed proposal, in a close vote.

Proposition 26 was one of those propositions written to be intentionally confusing and difficult to understand. It requires a two-thirds majority to approve certain fees instead of a normal majority. Most people probably thought of these fees as something like sales taxes or property taxes. In fact, the fees generally constitute taxes on business activities which harm society, such as alcohol retailers or businesses that use hazardous waste. In other words, most people thought of Proposition 26 as involving tax cuts, when in reality it’s about environmental regulation.

Proposition 26 has also added several billion dollars to the state budget deficit, something that an informed voter could only know by digging deep into the legislative analysis (the relevant text is at the end of the third-to-last paragraph). It constitutes one of those complex matters which should have been decided by the legislature, not the ballot box.

There is one final problem with Proposition 26 and with the proposition system generally. 52.5% of Californians voted for Proposition 26, while 47.5% voted against. Proposition 26 requires a 67% supermajority to pass certain fees. In other words, a bare majority of voters – half of whom probably had no idea what they were even voting for – was able to require 67% legislative approval for a policy to be enacted.

This is not just bad policy, it is rather undemocratic. 52.5% of voters should not be able to create a 67% supermajority requirement. A 67% supermajority requirement ought to require 67% approval of voters, not 50.1% – which is the current system in California.

In the 2008 presidential election 52.9% of Americans voted for President Barack Obama. Say, for instance, that those 52.9% of Americans also amended the constitution to require 67% of Americans to vote against Obama for him to lose re-election. Everybody would call that an undemocratic violation of American principles. Yet that is effectively how California’s proposition system currently works.

Here is a proposed reform: the next proposition that creates a supermajority requirement will need supermajority approval as well. 50.1% of Californians should not be able to set a 67% bar for policies to pass. It is practically impossible to get two-thirds legislative support in any Western democracy. Changing the law to create such a barrier should be just as difficult as well.


Vote No on Proposition 26: Supermajority to Pass Fees

This is the sixth part of a series of posts giving recommendations on California’s propositions. This post recommends a “no” vote on Proposition 26, which requires a two-thirds majority in the legislature to pass some fees.

Proposition 27 will be the subject of the next post and last in this series.

Trying to Understand What Proposition 26 Does

Proposition 26 is a complex and tricky piece of proposed legislation, with a number of subtleties. On its surface it sounds like a standard conservative proposal against higher taxes, and in a way Proposition 26 indeed fits this definition. But to just label Proposition 26 as a classic tax-cutting proposition is to somewhat misunderstand it’s purpose.

Proposition 26 has several parts, and each are quite complex. The first part deals with the difference between taxes and fees.

Part 1

In California, two methods by which the state raises revenues are through taxes, and through fees. While to the common person these sound like the same thing (indeed, they are) there is a distinct legal difference. Taxes, thanks to Proposition 13, require a two-thirds legislative supermajority to pass. Fees only require a simple majority.

Legally, taxes are defined as things are “used to pay for general public services.” Fees, on the other hand, “typically pay for a particular service or program benefiting individuals or businesses.”

The difference between these two categories can be murky at times, and there have been several court cases challenging a fee as actually a tax. It is confusing stuff.

In any case, conservatives have accused the legislature of raising taxes through the backdoor of increasing fees by a simple majority, rather than taxes (which require supermajority approval). This is probably true, and it is why Proposition 26 is being proposed. Here is the relevant summary by the legislative analyst:

  • Classifies as taxes some fees and charges that government currently may impose with a majority vote.
  • As a result, more state revenue proposals would require approval by two–thirds of each house of the Legislature and more local revenue proposals would require local voter approval.

Most politically intelligent individuals think that Proposition 26 will require all fees to have a two-thirds majority to pass. In fact, this is not true. Proposition 26 will redefine some fees as “taxes” (thus requiring a supermajority to pass), and keep some fees as fees. Once again, this is headache-inducing stuff. The point is that Proposition 26 makes it harder for California to raise revenues.

Part 2

But that is not all. Proposition 26 also:

  • Requires a two–thirds vote of each house of the Legislature to approve laws that increase taxes on any taxpayer, even if the law’s overall fiscal effect does not increase state revenues.

Again, this may sound confusing to people -  and, to be fair, it probably was written to be as confusing as possible. Don’t taxes already require two-thirds approval?

Well, actually, not all taxes do. Those taxes which increase “the amount of taxes charged to some taxpayers but offer an equal (or larger) reduction in taxes for other taxpayers” only require a majority approval.

These taxes are generally things most voters really, really like. They are usually taxes on business activities which pollute or harm society. One such tax imposes a fee on businesses that use or throw out hazardous waste. The revenues are used to clean this waste. Another tax is on alcohol retailers; the revenues are used for law enforcement and to reduce public nuisance problems associated with alcohol.

Currently, these taxes only require a simple majority to be approved. Proposition 26 changes this to require a supermajority for these taxes to become law, making their passage much more difficult.

Why to Vote Against Proposition 26

There are three good reasons to vote against Proposition 26.

The first involves ballot-box budgeting. In an ideal world, Proposition 26 would be left to the legislature to debate. It deals with subtle and complex concepts which even the most intelligent individuals have a hard time understanding.

Instead, it is being thrown to the ballot box in California’s broken proposition system. Proposition 26 is yet another example of an intentionally confusing proposition which almost nobody really understands (that includes this individual). Whether or not it is a good idea, it should be voted down and left to the legislature to decide.

The second reason to vote against Proposition 26 constitutes the deleterious effect that it will have on California’s budget. California is already famous for its late budgets (100 days late this year) as the legislature desperately squabbles to achieve the constitutionally-mandated supermajority. Much of California’s budget problems go back to restrictions on the legislature’s freedom to make decisions: two-thirds agreement is needed to pass a budget and two-thirds to pass taxes – a combination no other state has. Proposition 26 actually makes this problem worse, by restricting the legislature’s ability to do things even more. It goes down the wrong path in California.

Finally, one ought to vote against the proposition due to the restriction on taxes which do not increase state revenues. These taxes are not the types of taxes everybody loves to hate – income taxes, property taxes, sales taxes, etc. Rather, they are generally levied on businesses, not people, whose activities result in societal damage. They are taxes on businesses that produce hazardous waste, or alcohol retailers, or polluters. A vital part of role of the government is to regulate these negative externalities. Mandating a two-thirds supermajority for California to create beneficial regulations like these would be most unwise.

These are three good reasons to vote against Proposition 26: because it is yet another example of ballot-box budgeting, because it does more damage to an already broken budget system, and because its tax restrictions are too strict.

That is why I recommend a “no” vote on Proposition 26.





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