Prop. 26 - significant impact likely

By CMTA Staff

Capitol Update, Dec. 3, 2010

When Proposition 26 (2/3 vote to pass new taxes and fees) passed in November by a 5 point margin, it was lost in the midst of propositions that garnered a great deal more publicity: Prop 25 (simple majority budget approval), Prop 23 (AB 32 moratorium), and Prop 19 (marijuana legalization). As the smoke clears, this sleeper proposition could well rise in significance to rival the infamous Prop 13, passed in 1978 to rollback property taxes.

The title and summary for Prop 26 says that many state fees will now be considered taxes and will require approval by 2/3 vote of the California Senate and Assembly. Certain local fees will require approval by 2/3 of voters. It also repeals all related state laws passed since January 1, 2010 unless they are approved again by 2/3 of each house of the Legislature. Their repeal will be effective November 2011.

  1. A charge will not be considered a tax in five very specific instances:
  2. A specific benefit or privilege granted to the payer and not provided to those who are not charged and does not exceed a reasonable cost to the State to handle.
  3. A specific government service or product provided directly to the payer that is not provided to those not charged and does not exceed a reasonable cost.
  4. Regulatory costs incident to issuing licenses and permits, performing investigations, inspectionsand audits, enforcing agricultural market orders, and administrative enforcement and adjudication.
  5. Access or use of state property.
  6. A fine or penalty as a result of a violation of law.

In recent years, as the General Fund has dried up through lower revenues and high spending levels, politicians and state agencies have increasingly relied on fees to raise money without technically raising taxes, which are even more unpopular. Unfortunately, this has driven many businesses and jobs out of the state and become a deterrent to new businesses locating in California.

On the state environmental front, the California Environmental Protection Agencies are now operated almost entirely on fees that they unilaterally set. Prop 26 could impact Water Board fees which recently skyrocketed as well as charges planned for the implementation of AB 32. Another agency that is expected to feel the squeeze will be the Department of Toxic Substances Control which is on the verge of implementing its Green Chemistry Initiative regulations. The final word on which fees are considered taxes will undoubtedly be decided in the courts. Some think that the first test will be in Los Angeles County where plastic bags were recently banned and a 10 cent tax was levied on paper bags.

Read more Environmental Impacts articles

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