A California Chamber of Commerce-opposed bill that lowers the voter threshold to increase local taxes, including property taxes, awaits action by the Assembly Appropriations Committee when legislators return from summer recess.
The bill, ACA 1 (Aguiar-Curry; D-Winters), is an overbroad constitutional amendment that lowers the voter approval threshold from two-thirds to 55% for affordable housing and public infrastructure, thereby providing increased tax authority for every government agency in California—not just cities and counties, but thousands of potentially overlapping special districts.
In an opposition letter, the CalChamber outlined a number of problems with this bill:
Increases Housing Costs, Cost of Living
ACA 1 proposes to make it easier for local governments to increase various taxes, including sales taxes, parcel taxes and property taxes. Higher sales taxes increase the cost of home construction and everyday necessities used by homeowners and renters, while property taxes increase the burden of homeownership—all of which make housing less affordable for working families, including renters, the CalChamber said in its letter.
A March 2022 Public Policy Institute of California (PPIC) poll found that 62% of Californians believe state and local taxes are too high. By paving the way for higher housing costs and consumer costs, this measure would harm those it seeks to help, the CalChamber warned. PPIC also has found that voters strongly support retaining the two-thirds vote requirement for local taxes, and few voters believe the supermajority vote requirement has had a negative impact on government.
Promotes a Flawed and Regressive Tax Structure
California is the only state in the United States that allows a local add-on parcel tax, and ACA 1 would increase the number of parcel taxes throughout the state. No oversight has been provided to establish a comprehensive structure, and these taxes are both regressive and distortionary, without regard to a taxpayer’s ability to pay, the CalChamber said.
Parcel taxes, which can reach thousands of dollars annually in some parts of California, are extremely costly for seniors on fixed incomes and households struggling to make ends meet.
Erodes Taxpayer Safeguards
More than four decades ago, prompted by years of rising taxes, Californians resoundingly approved Proposition 13 to provide a check on local governments’ taxing authority, and to ensure a greater representative voice for those who would be taxed. Proposition 13 also limits taxes on property to 1% of the property’s assessed value.
The CalChamber pointed out that reducing the vote threshold would diminish the people’s voice on tax increases and would erode property tax safeguards. A May 2022 PPIC poll found that 64% of registered voters believe Proposition 13 has benefitted taxpayers, and this support reaches across nearly every major demographic.
Harms California Workers
After comparing the costs of operating in California versus other states, many employers have left California in recent years.
A Hoover Institution report found that from 2018 to 2022, at least 352 companies relocated their headquarters out of California—with many businesses citing the state’s tax burden as the deciding factor in their relocation.
The relocation of these companies and their employees to lower-cost states has a major impact on state and local tax revenue, causes unemployment for workers who cannot move to the new location, and is a sign that California must find ways to be more competitive, the CalChamber said.
“Tax increases such as those promoted in ACA 1 would be a step in the wrong direction, and would encourage more companies to move workers and investments to other states,” the CalChamber said.
Californians are sensitive to this problem, as illustrated by the 2020 Berkeley Institute of Governmental Studies poll finding that 78% of voters “agreed that taxes in California were already so high that they were driving many people and businesses out of the state.”
Staff Contact: Preston Young