(May 2, 2003) - Supporters of an initiative proposal that would have made it easier for the state Legislature to increase taxes or pass new ones announced this week that they will withdraw the plan.

The victory for business may be short-lived, however, if initiative supporters resubmit their proposal as they have said they will.

The proposal, backed by labor unions, would have lowered the vote requirement for enacting a tax from the current two-thirds to 55 percent. In effect, this would have allowed the majority party in the Legislature to increase taxes without support from the minority party.

Potential for Major Tax Hike

The non-partisan legislative analyst concluded the proposal had the potential to lead to a “major increase in state tax revenues and spending, depending on future legislative action.”

A 5 percent increase in tax revenues, for example, would boost taxes $3.5 billion, based on the current General Fund revenue base of about $70 billion, according to the legislative analyst.

In the news release announcing their plan to withdraw the initiative, supporters blamed the California Chamber for filing “status quo initiatives” containing “poison pill” provisions designed to kill their measure.

Instead of circulating the proposal for voter signatures, proponents said they will be redrafting it in response to the Chamber counterproposals and refiling it
with the attorney general “as soon as possible.”

Chamber Concerns

The Chamber had been taking the lead in preliminary steps to organize opposition to the tax hike initiative because of its broad negative implications for California and the economy.

As part of that effort, the Chamber had filed with the attorney general a number of initiative proposals to streamline the budget process without adding the negative features of the tax hike initiative and to require that fees which are truly taxes be adopted by a two-thirds vote.

Supporters had labeled the tax hike initiative the “Budget Accountability Act.” The name, however, diverted attention from the fact that the initiative would have made it possible to enact or increase taxes with support from only 22 of the 40 members of the Senate and 44 of the 80 members of the Assembly.

Voters would have been denied the opportunity to overturn these taxes through a referendum if they were passed as part of the state budget process. That denial would have removed an important check and balance on the legislative process that has been in place since the reform movements of the early 20th century.
Moreover, the tax hike initiative increased the vote requirement to cut taxes from 50 percent to 55 percent.

“When you make it easier for the Legislature to raise taxes, California citizens are going to pay more taxes - and further impact our already-struggling economy. That, in essence, is what this measure would have done,” said Chamber President Allan Zaremberg.

“We believe that California voters would have soundly rejected the initiative after learning of the costly implications from the legislative analyst,” Zaremberg said. If supporters decide to re-work the proposal and refile the initiative, we are fully committed to educating California voters on its true provisions, which would cost taxpayers untold millions. We are confident that a similar measure would be defeated.”

Staff Contact: Dominic DiMare