Opinion ID: 1436613
Heading Depth: 1
Heading Rank: 5

Heading: the initiative and taxation

Text: (6) As we have noted above, the history of the constitutional initiative provision makes it clear that the limitation on the referendum power, which excludes tax-related matters, does not extend to the use of the initiative to repeal taxes prospectively. When the statewide initiative power was added to the Constitution in 1911 as part of newly adopted article IV, section 1, taxation was not only a permitted subject for the initiative, but was an intended object of that power. The history of the measure, which confirms this intent, [5] is found in contemporary understanding of article IV, section 1, and statements made by the drafter and leading proponent of the initiative and referendum measures, Dr. John Haynes, who had earlier been successful in causing those powers to be added to several city and county charters. The contemporary understanding [6] is reflected in unsuccessful attempts made in 1917 to amend the initiative provision to exclude measures related to taxation, an amendment that would have been unnecessary if tax-related measures were not permissible subjects of the initiative. When that failed, unsuccessful attempts were made in 1919, 1920, and 1922, to increase the required signatures for tax-related initiative measures to a level that would have made qualification of such petitions next to impossible. Again, those efforts would have been unnecessary if the initiative could not be used to enact and repeal tax legislation. The subject matter of initiative measures was not addressed in the ballot pamphlet for Senate Constitutional Amendment No. 22, the initiative/referendum measure proposed in 1911. Statements made by Dr. Haynes and the Direct Legislation League, which he founded, about the purpose of the initiative are particularly instructive, however, because Dr. Haynes and the Direct Legislation League had persuaded the Legislature to propose the 1911 constitutional amendment. (Key & Crouch, The Initiative and Referendum in Cal., supra, pp. 429-440.) The secretary of the league was one of the three persons, the others being members of the Senate and Assembly, who revised the draft of Senate Constitutional Amendment No. 22 prior to introduction in either house. The original draft had been drawn up by a committee appointed by the Chairman of the Republican State Platform Committee. (Hichborn, Story of the Session of the Cal. Legislature of 1911 (1911) p. 95.) [7] The 1917 measure (Senate Constitutional Amendment No. 12) proposed to bar use of the initiative as well as the referendum for tax and assessment legislation. The amendment would have provided that neither could be used to enact or annul any law providing any method of assessment, or for the levy of any tax in this State. Senate Constitutional Amendment No. 12 was introduced in response to a failed single tax initiative that would have amended article XIII of the Constitution to limit taxation to that assessed on land values, and would have repealed existing tax authority and all taxes imposed pursuant to the existing authority. (Key & Crouch, The Initiative and Referendum in Cal., supra, pp. 557-558.) The Direct Legislation League stated in a letter to the sponsor of Senate Constitutional Amendment No. 12 that the measure takes away from the people the most important right of self-government which they possess, namely: the power of control over taxation. This strikes at the very root of popular self-government. Practically all historic struggles for liberty, including the English Revolution, the French Revolution and our own American Revolution, have centered about the question of the people's control over taxation.  (Hichborn, Story of the Session of the Cal. Legislature of 1921 (1922) p. 189, fn. 145, italics added.) In 1919, Senate Constitutional Amendment No. 5 was introduced in the Legislature in an attempt to limit use of the initiative for tax measures by increasing the number of signatures necessary to qualify an initiative petition from 8 percent to 25 percent of the voters. Dr. Haynes said in opposition: Again, if they can destroy the people's use of the initiative in the most important function, taxation, it will be the beginning of efforts which will lead to the destruction of the entire initiative power of the people. The bill failed in the Legislature. (Hichborn, Story of the Session of the Cal. Legislature of 1921, supra, at p. 190, italics added.) After the Legislature defeated the proposal to place Senate Constitutional Amendment No. 5 on the ballot in 1919, the measure was placed on the ballot as an initiative constitutional amendment in 1920 and defeated. The League to Protect the Initiative was formed by Dr. Haynes at that time as a reorganization of the Direct Legislation League. Its aim was `to defeat the proposed amendment to the initiative law which seeks to destroy the power of the people to initiate laws pertaining to the assessment and collection of taxes. ' (Hichborn, Story of the Session of the Cal. Legislature of 1921, supra, at p. 201.) A majority of the 30 votes in Alpine County favored the proposal. The measure was defeated in all other counties. A subsequent attempt to increase the number of signatures required to qualify an initiative petition to 15 percent failed in 1922. The League to Protect the Initiative issued a pamphlet at that time stating that with the increase only powerful organizations and interests could use the initiative in questions relating to the assessment or collection of taxes. ... (The Initiative and Referendum in Danger! (League to Protect the Initiative, pamp. 1922) p. 1, italics added.) Dr. Haynes said then that the purpose of the measure (Proposition 7) was the desire of the proponents  to get sole control of taxation  by making it impossible for the people as a whole to secure that number of signatures. (Tallinn, Direct Democracy (1977) p. 41, italics added.) Both the efforts to amend the initiative provision of the Constitution to exclude matters related to taxation and those to make it more difficult to use the initiative in tax matters reflect the understanding of the Legislature and the proponents of the initiative at the time of its adoption that there is no restriction on the use of the initiative in the area of taxation. The electorate could use the initiative process to prospectively adopt or annul (repeal) statutes imposing taxes notwithstanding the limitation on the use of the referendum power to reject statutes imposing taxes. [8] The San Francisco Charter provision in issue in this case, which is broader than the 1898 version, was added to the charter in 1911 (Stats. 1911, Conc. and Joint Res., ch. 25, pp. 1670-1679) by the same Legislature which put the statewide initiative, referendum, and recall measures on the ballot. Since the local power may not be restricted to less than that constitutionally authorized, the Legislature presumably intended that the San Francisco Charter also authorize use of the initiative to repeal a tax ordinance. To understand why neither the Constitution nor the San Francisco Charter includes an exemption for tax measures in the provisions governing the initiative, while the referendum provisions do exempt tax measures, an understanding of the impact of the referendum on governmental operation, and how the initiative differs, is essential. The constitutional and charter exemptions from the referendum (statutes and ordinances calling elections, levying taxes, appropriating funds for current expenses, and other urgency measures) are measures having special urgency, a delay in the implementation of which could disrupt essential governmental operations. County ordinances fixing the amount of money to be raised by taxes and those fixing the tax rate therefore go into effect immediately, while the effective date of other ordinances is delayed. (Elec. Code, §§ 9141-9143.) When a referendum petition qualifies prior to the effective date of a county ordinance, the ordinance is suspended pending reconsideration and repeal of the ordinance by the board of supervisors or submission of the measure to the voters at a regular or special election. The ordinance does not become effective unless and until a majority of the voters approves it at the referendum election. (Elec. Code, §§ 9144, 9145.) Therefore, if a tax measure were subject to referendum, the county's ability to adopt a balanced budget and raise funds for current operating expenses through taxation would be delayed and might be impossible. As a result, the county would be unable to comply with the law or to provide essential services to residents of the county. For that reason, when taxes levied to support essential governmental services arguably are involved in a referendum, the general rule requiring that referendum provisions be liberally construed to uphold the power is inapplicable. If essential governmental functions would be seriously impaired by the referendum process, the courts, in construing the applicable constitutional and statutory provisions, will assume that no such result was intended. [Citations.] One of the reasons, if not the chief reason, why the Constitution excepts from the referendum power acts of the Legislature providing for tax levies or appropriations for the usual current expenses of the state is to prevent disruption of its operations by interference with the administration of its fiscal powers and policies. ( Geiger v. Board of Supervisors, supra, 48 Cal.2d at pp. 839-840.) We concluded in Geiger, supra, that the same reasoning applied to referenda directed to acts of a county board of supervisors. Managing the county government's financial affairs, we reasoned, was entrusted to elected representatives, and was an essential function of the board which could not accurately estimate income if tax ordinances were subject to referenda. (48 Cal.2d at p. 840.) An initiative has no immediate impact, however. Passage of an initiative which repeals an existing tax will rarely affect the current budgetary process of a local government. The San Francisco regulation in dispute expressly did not do so. Moreover, local officials have ample notice of the potential impact of an initiative long before the measure can become effective. An initiative is proposed by petition submitted to the board of supervisors (Elec. Code, § 9102), but notice of an intent to circulate the petition for signature must be published before it may be circulated. (Elec. Code, § 9105, subd. (b).) The petition must qualify by gathering the required signatures within 180 days after the receipt of the title and summary. (Elec. Code, § 9110.) Within 30 days of filing the petition, if the petition is found sufficient, the election's official certifies the result to the board at its next meeting (Elec. Code, §§ 9114, 9115), at which time the supervisors must either pass the proposed ordinance as provided or place the ordinance on the ballot at a special election or the next statewide election. (Elec. Code, §§ 9116-9118.) Even those initiatives that qualify for a special election may not actually be voted on for as long as four, and in some cases six, months after the proposed ordinance is presented to the supervisors. (Elec. Code, § 9117.) Therefore, the potential for disruption of local government services by qualification of a referendum petition on a newly enacted tax measure is not present in the procedures leading to possible passage of an initiative which prospectively repeals an existing tax. Moreover, as we held in Hunt v. Mayor & Council of Riverside, supra, 31 Cal.2d 619, 622-623, a city charter may not restrict the broad power of initiative and referendum granted by the Constitution. The history of the statewide initiative confirms that it was the intent of the electorate that the initiative be used to repeal a tax. In the most recent case to consider the use of the statewide initiative power to repeal a tax, Carlson v. Cory (1983) 139 Cal. App.3d 724, 731 [189 Cal. Rptr. 185], the court affirmed the people's power. In Carlson, the validity of initiative statutes which repealed the state's inheritance and gift tax laws was challenged on the ground that the measures interfered with the Legislature's power over taxation, a power that was claimed to be supreme. The Court of Appeal rejected that argument, holding that there was no constitutional limitation on the people's exercise of the initiative and this power was greater than that of the Legislature. This reservation of power by the people is, in the sense that it gives them the final legislative word, a limitation upon the power of the Legislature. ( Id., at p. 728.) The constitutional grant of authority to the Legislature to pass laws regarding taxation of property did not, the Court of Appeal held, limit the people's plenary power of initiative, and that power may be used to repeal a tax. That conclusion is consistent with the history of the statewide initiative. Inasmuch as the statewide initiative may be used to repeal a tax, initiative power granted by the San Francisco charter may be no less. ( Hunt v. Mayor & Council of Riverside, supra, 31 Cal.2d 619, 622-623.) And, as we have shown, the initiative power granted in the charter is at least as broad as the statewide initiative power. [9] The parties agree that the Board has the power to repeal the residential utility tax. Even though the Board has the power to repeal the tax, and the electors of San Francisco reserved to themselves the power to enact any legislation within the authority of the Board, the Court of Appeal held in this case that local taxes may not be repealed by a local initiative measure. Notwithstanding the great difference in impact between a referendum on a newly passed tax ordinance and an initiative tax repeal, the court held that the power of the initiative does not extend to the conducting of what it believed amounts to a referendum on a tax previously imposed by a local legislative body. The court reasoned that neither initiative nor referendum may curtail a local legislative body's power of taxation. Relying on a line of decisions stemming from Myers v. City Council of Pismo Beach (1966) 241 Cal. App.2d 237 [50 Cal. Rptr. 402] ( Myers ), the Court of Appeal concluded that this is a settled rule.