It’s no secret that tax-and-spend interests have hated Proposition 13 since its adoption by the voters in 1978. Immediately after passage, Prop. 13 was the target of numerous lawsuits and legislative proposals seeking to create loopholes that would allow government to grab more tax dollars from California citizens.

These constant attacks compelled taxpayer advocates to go back to the voters with multiple initiatives to preserve the letter and spirit of Prop. 13. These included Prop. 62 in 1986 (voter approval for local taxes); Prop. 218 (closing loopholes for local fees and so-called “benefit assessments”); and Prop. 26 (requiring “fees” to have some nexus to the benefits conferred on the fee payers).

However, the latest tax-grabber to treat [property] owners as ATMs is state Senator Bob Hertzberg, D-Van Nuys. If he gets his way, Californians will be spending a lot more on water and sewer service. He seeks to do away with the critical “cost of service” requirements for water rates as well as treat “storm water runoff” (the rain that runs down street gutters) the same as “sewer service,” opening the door to virtually unlimited — and unvoted — sewer rates.

As to the latter proposal, Hertzberg has introduced Senate Bill 231. This proposal would attempt to rewrite Prop. 218 with a statute to allow for storm water to be included under the definition of “sewer,” meaning that it would no longer be subject to a Prop. 218 election. This is not a minor issue and, in fact, when the city of Salinas attempted to charge residents for “storm water runoff” as part of their sewer bill, the Howard Jarvis Taxpayers Association sued and won. The published decision in HJTA v. City of Salinas was a significant victory for homeowners as the city was attempting to load up its “sewer” service with all kinds of costs unrelated to sewer service including street sweeping.

Of course, the real problem with SB231 is that it attempts to rewrite part of the California Constitution with a mere statute. This is a big no-no. The city of Salinas’ decision was an interpretation of Prop. 218 which added Articles XIIIC and XIIID to the California Constitution. Courts are likely to take a dim view of a legislative override of their interpretation of the state constitution.

To add insult to injury, Hertzberg has also introduced Senate Constitutional Amendment 4. While this bill is basically intent language and needs to be refined, the point of this bill will be to undermine Prop. 218’s proportionality and cost of service requirements. Under the state Constitution, rates for property related fees (water/sewer/refuse) need to be equivalent to the cost of providing the service. Taxpayers fear that SCA 4 will ultimately overrule another taxpayer court victory in the city of San Juan Capistrano which upheld the concept of “cost of service.” This decision has been misinterpreted by Gov. Brown and the media as prohibiting the ability of water districts to create tiered water rates. In truth, tiered water rates — charging more for higher levels of water use — can be legal if the municipality can demonstrate that the extra water costs more.

What Hertzberg and big government bureaucrats want to do, however, is to use water rates as another opportunity to engage in social engineering. They wish to charge those water users they perceive as “bad” more per gallon than those users they perceive as “good.” The beauty of “cost of service” rates, however, is that they are fair for everyone: You pay for what you use.

More importantly, when government deviates from “cost of service” requirements, it expands the opportunity for them to do what they do best — extract more money from citizens.

Taxes, Fees, Charges and Assessments

What Difference Does it Make?

What’s the difference between a tax and a fee? There is no easy answer and the political class likes it that way. In fact, they would prefer that the public remain confused to the point of apathy.

The political class, of course, consists of elected officials, bureaucrats and their special interest allies who are to the Capitol what insider traders are to Wall Street. Working in lockstep, their approach to increasing the take from taxpayers was best outlined by Jean Baptiste Colbert, Minister of Finance under Louis XIV of France: [The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.]

But taxpayers are not defenseless because Propositions 13 – later strengthened by Proposition 218, the Right to Vote on Taxes Act – provides effective weapons against an insatiable government ever in search of more revenue. These include voter approval requirements. At the state level, new or higher taxes require a two-thirds vote of each house and, at the local level, voter or property owner approval requirements allow those who have to pay a government exaction (no matter what it is called) an opportunity to say no.

However, to protect themselves, taxpayers must be knowledgeable, alert and ready to fearlessly protect and exercise their rights.

Tax v. Fee

Therefore, while most taxpayers don’t have a law degree, here are some basics about the difference between a “tax” and a “fee.” There are very few legal limitations on “taxes.” About the only way a tax could be unconstitutional is if it impaired a fundamental right (a “poll” tax on the right to vote) or if it singled out some group for discriminatory purposes. But fees are different. A fee is a charge for something that confers a benefit to the fee-payer that is not available to those who do not pay the fee. A classic example is a charge for entering a state campground.

Until the passage of Proposition 26 in 2010, the legislature could approve fees with a simple majority vote. But in 2011, the Legislature approved, with a simple majority, charging 850,000 rural homeowners an annual “fire fee” of $150. The “fee” was not accompanied by any additional benefit or service, clearly making it a tax requiring a two-thirds vote of the Legislature. This issue is currently being litigated by taxpayers, but it is a classic example of the dishonest ends to which tax raisers are willing to go to wring ever more money from taxpayers.

Moreover, the political class has a habit of pursuing taxes that are not apparent to the general public. Almost any tax on business fits into this category. As Howard Jarvis liked to say, businesses do not pay taxes, “we do.”

As part of Obamacare, the federal government imposed a tax scheme designed to stop employers from offering top quality health plans. Backers of the Affordable Care Act included a 40 percent tax on providers of what were derisively described as “Cadillac” plans.  As these plans disappear, the uninformed will assume that it is their employer who is responsible, when, in fact, it is government.

Here, in California, a major hidden tax is cap-and-trade legislation, (not approved with a two-thirds vote), that compels companies to buy carbon credits. Of course, these costs are passed on and drivers feel the impact every time they fill up with gasoline that costs, by the most conservative estimates, an additional 12 cents per gallon with more increases on the horizon. Unaware of the impact of cap-and-trade, many motorists may mistakenly assume that the high cost of gas is entirely due to the petroleum companies.

This is why taxpayers are closely watching a case just argued before the Sacramento appeals court, where opponents argue that cap-and-trade charges amount to an unconstitutional tax. The court is expected to render a decision within 90 days but, regardless of the outcome, the loser is likely to appeal to the California Supreme Court.

Jon Coupal is president of the Howard Jarvis Taxpayers Association — California’s largest grass-roots taxpayer organization, dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights.