California Supreme Court Hears Arguments On Proposed Tax Initiative

In December of 2023 I reported on an effort by Governor Gavin Newsom and state Democrats to prevent a ballot initiative from ever seeing the light of day. That initiative officially known as the “Taxpayer Protection and Government Accountability Initiative,” if approved by voters would require voter consent before governments at the state, county and municipal level could levy additional taxes and fees.

The battle lines over the measure appear to be drawn between State Democrats and public sector unions against private business interests who are promoting the measure.

Democrats have petitioned the courts to declare the initiative—whose petition with well over one million signatures apparently has enough support to qualify it for the November 2024 ballot, as unconstitutional and thwarting it before the voters have a chance to weigh in. This move is all but unprecedented—the lone recent exception being an effort by initiative to divide California into three separate states which was declared unconstitutional before reaching the ballot in 2018. Normally, the courts would have their say on the constitutionality of an initiative only after it was approved by the voters.

Presently, it takes a two thirds vote of the California Senate and Assembly to raise taxes. In California, this amounts to all but an automatic rubber stamp as tax hikes go. Not only would this initiative, if approved by California voters, require subsequent increases in state and local taxes to be first approved by voters, but it would also act retroactively on tax and fee hikes stemming from actions beginning in 2022. State officials said the retroactive nature of the proposal would affect 15 state bills already signed by Governor Newsom since the beginning of 2022 and 131 local initiatives that similarly raise taxes and fees during this time period.

On Wednesday, the California State Supreme Court finally entertained arguments on the effort of California Democrats to preemptively quash the initiative. Judging from the questions and comments coming from the Supreme Court justices there seems to be, at the very least, hesitancy for an outright cancellation of the initiative before it reaches the November ballot.

Justices peppered both sides of the lawsuit with questions and appeared to be tentative to remove the entire measure from the ballot without giving the voters their say first. Chief Justice Patricia Guerrero got right to the threshold question at the outset of the hearing by  pointedly asking attorney Margaret Prinzing, who is representing Newsom and state Democrats, why the court should take the extraordinarily rare step of removing the issue from the ballot before the voters had their say. Justice Joshua Groban followed with a similar query, and Justice Martin Jenkins pointed out that other actions would be available to the court such as freezing certain aspects of the initiative that could diminish government revenue. Justice Leondra Kruger pointed out that the court could review individual aspects of the initiative for constitutionality after passage instead of preventing the entire proposition from reaching the ballot. This would be the more commonplace course of action.

Prinzing responded by claiming that having the measure as a potential ballot question is already having negative consequences for governments at all levels as they attempt to balance forward-looking budgets with the specter of a dramatic alteration in the mechanism for raising revenue looming. While proponents of the initiative tout the measure as amending the State Constitution, Prinzing has claimed that the potential ballot measure amounts to a revision of the State Constitution, an effort that would first require endorsement by a two thirds majority of each house of the state legislature before then being submitted to the voters. She said:

“This measure takes away the Legislature’s power over all taxes, a fundamental change in our government structure.”

She went on to claim that this proposal would take away the legislature’s ability to impose taxes and leave them only with the ability to propose them with the voters being the final arbiters. She continued:

“That’s a fundamental shift in power that separates this measure from all the other tax measures that have come before it.” 

Attorney Thomas Hiltachk, the lead proponent of the initiative, disagreed with Prinzing and sided with the line of questioning coming from several of the justices. Hiltachk asserted that if the ballot initiative is passed by voters, the courts would then have the ability to review each of its provisions and rule on their constitutionality individually. He claimed that the move to preemptively remove the entire measure from the ballot, was an effort being sought 

“…by people in government who do not want change.”

Not all justices hearing the arguments appeared to side with Hiltachk’s premise. Justice Goodwin Liu confronted Hiltachk by asking whether the proposal if passed would mandate that simple increases in park use fees and library fines would be subject to voter approval. Taking the tack that this measure would be a significant revision of the state constitution he asked:

“Doesn’t passage of this measure essentially shift us from a republican form of government toward a form of direct democracy?”

“Given how fundamental the power of taxation is, wouldn’t your proposal create a fourth branch of government?”

Hiltachk responded: 

“No. The people have the last word.”

Hiltachk went on to state that even with passage of this initiative, municipal governments would still have the power to levy fees, however, administrative agencies made up of unelected bureaucrats would no longer be able to raise fees without the approval of the governing body.

Even with the arguments before the court and the questions proffered by the justices, there seemed to still be some question as to which taxes and which fees proposed by which level of government would actually be subject to direct voter approval. That will all need to be sorted out should the measure be allowed on the November ballot.

So, what happens next?

By law a decision from the court is due within 90 days. However, the sponsors of the measure have asked for a decision prior to June 27 which is the deadline to get the initiative on the November ballot.

And what can we expect from the Supreme Court? Predicting an outcome from the California Supreme Court is a dicey proposition. However, from the tenor of the questions coming from the justices, it appears that the court might just be unwilling to give Newsom and state Democrats what they want—pulling the entire initiative before it ever gets to the ballot. 

And when it gets to the voters in November? Certainly, state Democrats can rely on their blue state voting minions to “do the right thing” and vote the measure down, right? Not so fast. California voters, while quick to reflexively support liberal Democrats at the polls, can surprise us—especially when it comes to referenda covering tax policy. It would not be a shocker to find that if given the opportunity, California voters would support the Taxpayer Protection and Government Accountability Initiative. Newsom and state Democrat leaders know this and can’t afford to roll the dice with their otherwise supportive voters.

And when that happens, it is unquestionably back to the courts for the justices in black robes to dissect what was passed and strike down in part or in total the will of the people. This battle is just gearing up.