State and Local Fees and Charges
Under current California law, taxes are distinguished from fees and charges. Taxes are typically used to pay for general public services such as education, prisons, health, and social services. Creating or increasing taxes requires a two-thirds vote of each house of the Legislature for state taxes. Local taxes require the approval of two-thirds of local voters if the use of the funds is specified, and a majority of the local voters if the local government does not specify how the funds will be used.
In addition to taxes, California state and local governments impose a variety of fees and charges on individuals and businesses. The revenue from fees and charges is typically used to pay for particular services or programs. For example, user fees include state park entrance fees and garbage fees that are used to pay for services. Regulatory fees are used to pay for government programs that regulate the activities of businesses or people to achieve public goals, or offset environmentally detrimental activities. For example, fees on the purchase of beverage containers are used to support recycling programs. Property charges, such as those imposed on developers to improve roads leading to new subdivisions, are used to pay for improvements and services that benefit the property owner.
Under current law, state and local governments usually can create or increase a fee or charge with a majority vote of the governing body.
Proposition 26
Proposition 26 would expand the definition of a tax to include many payments that are currently considered fees or charges. It would increase the number of revenue proposals that would be subject to the two-thirds vote requirement that applies to taxes. In general, fees and charges that government imposes to address health, environmental, or other societal or economic concerns would become taxes. Some specific fees that would be considered taxes are the state oil recycling fee, the state hazardous materials fee, and some local fees on alcohol retailers.
Proposition 26 would also alter the approval requirement for state tax measures. Under current practice, a law that increases the amount of taxes charged to some taxpayers but offers an equal (or larger) reduction in taxes for other taxpayers has been viewed as not increasing revenue, and therefore can be approved by a majority vote of the Legislature. Proposition 26 specifies that if a law would result in any taxpayer paying a higher tax, even if there is no overall increase in revenue, then that law is subject to the two-thirds vote requirement.
Existing State Laws in Conflict with Proposition 26
Any state law adopted between January 1, 2010 and November 2, 2010 that conflicts with Proposition 26 would be repealed one year after the proposition is approved, unless two-thirds of each house of the Legislature passes the law again. For example, in 2010 the state increased fuel taxes paid by gasoline suppliers, but decreased fuel taxes paid by gasoline retailers. Though this did not result in increased revenue, the state has taken advantage of the greater spending flexibility over the use of the revenue to shift about $1 billion of annual transportation bond costs from the General Fund to fuel tax funds. Because the Legislature approved this change with a majority vote, the law will be repealed in November 2011, unless the Legislature approves the tax again with a two-thirds vote in each house.
