Opinion ID: 1412641
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Heading: Reservation of Power Under Article XIII

Text: Article XIII, section 26, subdivision (a), of the Constitution provides as follows: Taxes on or measured by income may be imposed on persons, corporations, or other entities as prescribed by law. (Italics added.) Section 33 states, The Legislature shall pass all laws necessary to carry out the provisions of this article. Although article XIII deals expressly with income taxation, and the broad grant of the home rule amendment does so only by implication, the traditional rule that specific constitutional provisions govern more general provisions is applicable only if section 26 is indeed specific on the precise point at issue: the identity of the governmental entities entitled to levy taxes upon income. Focusing upon the phrase as prescribed by law in section 26, and the specific reference to the Legislature in section 33, plaintiffs maintain that the two provisions, in combination, indicate a constitutional purpose that the power to impose income taxes shall rest exclusively with the state. I do not agree. We have previously held that Where the power of taxation has been lodged [by constitutional provision] in the state to the exclusion of municipalities and other entities of that character, it has customarily been done by specific language expressive of such a purpose ( Ainsworth v. Bryant (1949) 34 Cal.2d 465, 472 [211 P.2d 564]), and that even constitutional provisions which clearly are reservations of taxing power should be strictly construed, and read as limiting the scope of the power being withdrawn from local entities. ( Id., at pp. 472-473.) The Constitution contains several examples of such explicit reservations. (E.g., Cal. Const., art. XIII, §§ 27 [state tax upon banks is in lieu of all local taxes, with specified exceptions], and 28 [state has sole power to tax insurance companies, with specified exceptions]; art. XX, § 22 [state has sole authority to license and regulate sale or purchase of alcoholic beverages].) In contrast, the provisions cited by plaintiffs are notably and undeniably vague. Section 26, subdivision (a), does not specify who may levy income taxes, and section 33 can hardly be deemed a clarification, since it obviously was intended simply as an enabling clause to permit the Legislature to enact such laws as might be necessary to implement those numerous permissive provisions of article XIII which are not self-executing. It is true that the available legislative history tends to indicate that when the initial version of section 26 was adopted, its supporters were concerned solely with the power of the state to levy income taxes. One delegate to the constitutional convention explained during the debate over the section, It is a question among the lawyers of this Convention whether, if it is not declared in this Constitution, that the Legislature has power to impose such a tax  whether it would have such a power. The reasons given are that the various taxes will be enumerated in this Constitution which the Legislature shall impose, and this being left out, the argument will be that they have no right to impose any other taxes than those enumerated in the Constitution. (2 Debates and Proceedings, Cal. Const. Convention 1878-1879, p. 947 (remarks of Mr. Ayers).) It will be noted that reference is explicitly to the Legislature, and given the prevailing theory that local entities possessed only those powers delegated by the sovereign state, the independent power of a municipality to enact an income tax could hardly have been at issue. (Januta, The Municipal Revenue Crisis: California Problems and Possibilities, supra, 56 Cal.L.Rev. at pp. 1541-1543; Sato, Municipal Affairs in California, supra, 60 Cal.L.Rev. at p. 1104, fn. 190; but see Comment, The Municipal Income Tax and State Preemption in California (1971) 11 Santa Clara Law. 343, 350-353.) It need not follow, however, that the section was intended to, or does, vest in the Legislature alone the power to tax income. The purpose of the income tax provision in section 26 was to establish the legitimacy of the income tax as a permissible levy. In addition to the enumerated powers problem discerned by Mr. Ayers, there was potential difficulty in the fact that an income tax was widely regarded as a species of property tax. (See Pollock v. Farmers' Loan & Trust Co. (1895) 157 U.S. 429, 579 [39 L.Ed. 759, 818, 15 S.Ct. 673], affd. in part on rehg. 158 U.S. 601, 627-629 [39 L.Ed. 1108, 1122-1123, 15 S.Ct. 912].) Since the California Constitution, like most state constitutions, provided for uniform taxation of property in proportion to value (Cal. Const., art. XIII, § 1), a graduated income tax, or an income tax providing for certain exemptions for particular classes, would have been subject to challenge on constitutional grounds. (Traynor & Keesling, The Scope and Nature of the California Income Tax (1936) 24 Cal.L.Rev. 493, 502-506.) To assure the availability of a mode of taxation more equitable than the uniform property tax, the convention prudently removed any potential constitutional barrier by differentiating the two taxes, property and income, and expressly approving the more flexible income tax. (2 Debates and Proceedings, Cal. Const. Convention, supra, at p. 945; see also, 3 id., at p. 1325.) With the adoption of the home rule amendment 17 years later, in 1896, chartered cities choosing to take advantage of the grant acquired, with respect to local matters, a power of taxation ... concurrent with, not dependent upon, the state Legislature. (Comment, The Municipal Income Tax and State Preemption in California, supra, 11 Santa Clara Law. at p. 352; see Ex Parte Braun, supra, 141 Cal. 204, 211-212.) The legislative history and the language of section 26 neither mandate nor support a conclusion that the power to tax income for local purposes was excluded from the bundle of municipal taxing and regulatory powers which were granted to cities by article XI, section 5. That an income tax may be imposed, by the terms of section 26, only as prescribed by law indicates simply that the provision is not self-executing, and although the term law generally refers to state statutes, as distinguished from city ordinances, that usage is not inflexible. (See, e.g., Rothschild v. Bantel (1907) 152 Cal. 5, 9 [91 P. 803] [law, in constitutional provision, can refer to provisions of a city charter as well as state statutes]; In re Johnson (1920) 47 Cal. App. 465, 467 [190 P. 852] [law, in state statute, includes city ordinance]. Until 1974, the home rule amendment itself referred to municipal laws and regulations. See Cal. Const. Revision Com., Proposed Revision (1968) p. 59.) Consequently, I would conclude that the power to enact an income tax is not reserved exclusively to the state Legislature by article XIII, sections 33 and 26, subdivision (a). The inquiry should not, however, terminate at this point. Even if the power to tax income is not constitutionally reserved, the Legislature may appropriate that power to itself by statute unless a city income tax is a municipal affair within the meaning of article XI, section 5, subdivision (a), the home rule provision of the Constitution. On matters of statewide concern, statutes adopted by the Legislature are supreme, superseding all conflicting municipal ordinances. Is imposition of a local income tax properly a municipal affair?