ARTICLE
About a year ago, I wrote how state laws are created through the back room deal, known as ‘gut and amend.’ You can re-read about that legislative practice here: Back Room Deal 9-2017 These past few months we have watched, listened and sometimes, shook our heads with amazement about the maneuvering of policy at the local city level to attain voter approval of a simple 1/4 cent sales tax. Marred in a difficult financial bind for many reasons, the Santa Cruz City Council achieved the first leg of a very complicated revenue enhancement measure to offset the growing deficit by getting Santa Cruz voters to say YES to a sale tax measure on the June 5 ballot. No one within the walls of government can fault the City Council for adjusting its taxing powers to find new funding sources that provide the funds for an array of city services - including public employees. Government entities do it frequently to keep pace and fund a city’s programs, projects and people. But last week’s tangled web of different constituencies, all working angles to achieve another source of funds for the second leg of the wobbly financial stool, seemed out of sort. We all agree it takes at least three or four legs to support the stool. The City Council moved swiftly last month to place a Sugar Beverage Tax on the June 26 Council Agenda to address health related issues within the city. If passed (which it did) the tax would appear on the November 6 ballot. The well-meaning idea was approved on a 5-2 vote with two Council members voting against the measure because the timing just wasn’t right. Your Chamber advised the Council before the vote that creating good public policy can be a very precarious matter and if given time to fully review and consider the proposal in more depth, the Chamber may have sided with the majority. But without that discussion, we suggested that the council ‘pause’ and come back another time. They didn’t. Maybe the council was unaware or just did not realize the larger issues at stake here. Hidden in the bushes in our State Capitol was a more intense battle regarding a state initiative (that recently received enough signatures to qualify for the ballot). This initiative could do an end run on Santa Cruz’s local sugar beverage tax. Imagine you are playing a masterful hand of poker and think you have won the last hand with your local move. However, there was one or two more hands to be dealt. The back room deal was just now seeing the light of day. The discussion around “the proposed deal” was far more telling than one city’s local tax measure. You see, the art of legislation (and poker) is knowing when to hold them and knowing when to fold them. Your opponent had more cards to play. To remove a state initiative requiring a two-thirds vote on all local taxes on the motives of the soda industry to avoid taxes on soda or secondly, take on the locals at the ballot box. It is very clear there is another side to that coin that has received little attention. Local governments and unions opposed to the state wide initiative want the leeway to raise taxes to deal with local needs - better parks, filling street potholes, police and fire protection and yes, to address pension obligations that are eating away at local services. One of the leading opponents of the state initiative, SEIU, issued a release claiming the “temporary pause on further local soda taxes gives California the opportunity to work on a statewide approach to the public health crisis of diabetes.” No one disagrees on that point. One root cause of this initiative measure can be traced back to a California Supreme Court decision in California Cannabis Coalition v. City of Upland. The court ruled that if taxes came to the ballot via initiative, a simple majority vote was needed to pass the tax regardless if the tax revenue was earmarked for a specific purpose. Taxpayer concern stemmed from the fact that local governments could work with special interests to put a measure on the ballot for a good sounding cause (police services or libraries, for example) and then move money within the budget to cover other employee related costs. The “Tax Fairness, Transparency and Accountability Act” would require acknowledgement on where the new tax dollars are spent, including covering employee costs and require a 2/3 voter support. The “deal” was consummated when Senate Bill (SB 872) was signed into law putting a soda ban in place for 12 years. The statewide initiative was pulled by the sponsor. The deal of substituting a local sugar beverage tax so the door remains open for ‘other’ taxes to be placed on local ballots that can still pass with a simple majority vote. We should anticipate a wave of new tax measures will follow. One interesting note about the deal: The ban on soda taxes is supposed to end in 2030. That is the same year that the extended income tax on the wealthy is supposed to sunset. Did we learn a lesson in 2018? The political process will be more intense and it will come again in 2030 setting up as the year of tax wars.
About a year ago, I wrote how state laws are created through the back room deal, known as ‘gut and amend.’ You can re-read about that legislative practice here: Back Room Deal 9-2017
These past few months we have watched, listened and sometimes, shook our heads with amazement about the maneuvering of policy at the local city level to attain voter approval of a simple 1/4 cent sales tax. Marred in a difficult financial bind for many reasons, the Santa Cruz City Council achieved the first leg of a very complicated revenue enhancement measure to offset the growing deficit by getting Santa Cruz voters to say YES to a sale tax measure on the June 5 ballot. No one within the walls of government can fault the City Council for adjusting its taxing powers to find new funding sources that provide the funds for an array of city services - including public employees. Government entities do it frequently to keep pace and fund a city’s programs, projects and people.
But last week’s tangled web of different constituencies, all working angles to achieve another source of funds for the second leg of the wobbly financial stool, seemed out of sort. We all agree it takes at least three or four legs to support the stool.
The City Council moved swiftly last month to place a Sugar Beverage Tax on the June 26 Council Agenda to address health related issues within the city. If passed (which it did) the tax would appear on the November 6 ballot. The well-meaning idea was approved on a 5-2 vote with two Council members voting against the measure because the timing just wasn’t right.
Your Chamber advised the Council before the vote that creating good public policy can be a very precarious matter and if given time to fully review and consider the proposal in more depth, the Chamber may have sided with the majority. But without that discussion, we suggested that the council ‘pause’ and come back another time. They didn’t.
Maybe the council was unaware or just did not realize the larger issues at stake here. Hidden in the bushes in our State Capitol was a more intense battle regarding a state initiative (that recently received enough signatures to qualify for the ballot). This initiative could do an end run on Santa Cruz’s local sugar beverage tax.
Imagine you are playing a masterful hand of poker and think you have won the last hand with your local move. However, there was one or two more hands to be dealt. The back room deal was just now seeing the light of day. The discussion around “the proposed deal” was far more telling than one city’s local tax measure. You see, the art of legislation (and poker) is knowing when to hold them and knowing when to fold them. Your opponent had more cards to play. To remove a state initiative requiring a two-thirds vote on all local taxes on the motives of the soda industry to avoid taxes on soda or secondly, take on the locals at the ballot box.
It is very clear there is another side to that coin that has received little attention. Local governments and unions opposed to the state wide initiative want the leeway to raise taxes to deal with local needs - better parks, filling street potholes, police and fire protection and yes, to address pension obligations that are eating away at local services.
One of the leading opponents of the state initiative, SEIU, issued a release claiming the “temporary pause on further local soda taxes gives California the opportunity to work on a statewide approach to the public health crisis of diabetes.” No one disagrees on that point.
One root cause of this initiative measure can be traced back to a California Supreme Court decision in California Cannabis Coalition v. City of Upland. The court ruled that if taxes came to the ballot via initiative, a simple majority vote was needed to pass the tax regardless if the tax revenue was earmarked for a specific purpose. Taxpayer concern stemmed from the fact that local governments could work with special interests to put a measure on the ballot for a good sounding cause (police services or libraries, for example) and then move money within the budget to cover other employee related costs.
The “Tax Fairness, Transparency and Accountability Act” would require acknowledgement on where the new tax dollars are spent, including covering employee costs and require a 2/3 voter support. The “deal” was consummated when Senate Bill (SB 872) was signed into law putting a soda ban in place for 12 years. The statewide initiative was pulled by the sponsor.
The deal of substituting a local sugar beverage tax so the door remains open for ‘other’ taxes to be placed on local ballots that can still pass with a simple majority vote.
We should anticipate a wave of new tax measures will follow. One interesting note about the deal: The ban on soda taxes is supposed to end in 2030. That is the same year that the extended income tax on the wealthy is supposed to sunset.
Did we learn a lesson in 2018? The political process will be more intense and it will come again in 2030 setting up as the year of tax wars.