Wednesday, January 07, 2009

Legality of Proposed California Tax Plan in Question


Any budget agreement between Democrats and Gov. Arnold Schwarzenegger that skirts the state's two-thirds vote requirement for new taxes will almost certainly be challenged in the courts – and there's a significant chance the state would lose, some legal experts said Monday.

It's not a slam-dunk case for either side, though, law professors say, because the Legislature is largely moving into uncharted territory with its plans to break the budget stalemate by effectively replacing a tax that is tough to increase with a fee that is much simpler to boost.

"The question is, 'What is a tax?’” said Jesse Choper, Earl Warren Professor of Public Law at the University of California, Berkeley. "It may be a simple little question, but like most things, it can be more complicated."

Democrats and the governor are trying to hash out a plan that would eliminate about half of the state's burgeoning $40 million deficit. The foundation of the plan is a measure passed by the Legislature last month that would raise some fees, lower some taxes and come up with an extra $10 billion or so in revenue – all without triggering the Proposition 13 requirement that any tax increase be approved by a two-thirds vote in the Legislature.

The governor threatened to veto the plan, then said he might go along with it if it contained several new provisions. Republicans, who didn't have the votes to kill the plan, nonetheless generally hate it and contend it violates the state constitution.

Daniel Simmons, a law professor at UC Davis who specializes in taxation issues, said it would be tough for Democrats to convince a court that a series of moves that results in a huge increase in revenue from citizens doesn't constitute a tax increase.

"It sounds an awful lot like a tax to me," Simmons said, echoing a similar sentiment from Choper. "If they are not raising revenue (with the proposal), something is very funny. It's very hard to make that claim."

Any court case involving the plan would likely focus on the differences between a fee and a tax, Simmons and others said.

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