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State Tax Notes

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St. Tax Notes



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A significant fiscal development in recent decades in many states has been revision of tax laws and policy not by legislatures but by voters through the initiative process. Initiatives often have been used to restrain the growth of taxes and spending, and to that extent the owners of wealth, property, and income have benefitted from initiatives. Among the many examples of controversial and important state tax and spending initiatives, one may think of the Taxpayer Bill of Rights in Colorado, the supermajority requirement for tax increases in Nevada, and of course Proposition 13 in California.

However, that gate swings both ways; initiatives also can be used to increase taxes and spending. This installment of the column discusses one such initiative, California's Proposition 63 and a recent case, Jensen v. Franchise Tax Board, rejecting challenges to it.

The first part below describes the initiative and the case. The second part addresses the equal protection challenges to the initiative. Those challenges were easily rejected by the Jensen court, but reviewing them may serve as a doctrinal refresher. The third part considers the separation of powers challenges to the initiative. Although those challenges also were rejected in Jensen, they illustrate how two-track tax legislation – tax lawmaking by the legislature versus tax lawmaking directly by voters via initiatives – can engender confusion and tensions. The fourth part depicts Jensen in a larger context. The case is a window onto a portion of the panorama of tax politics. Through that window may be glimpsed the pushback by wealthy taxpayers, a phenomenon that may well grow in the years to come.


© 2009 Steve R. Johnson


First published in State Tax Notes.

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