Supermajority gives California Dems a chance to finish what they started

Trent Lange, the president and executive director of the California Clean Money Campaign, which supported the bill, said that the huge amounts of money that were spent in the most recent election cycle, and what he described as the demonstrated inadequacy of current transparency provisions, show that stricter disclosure requirements are needed. Lang pointed to an $11 million contribution that was made to the campaign to defeat Proposition 30, Governor Brown’s signature tax increase.  An inquiry by California’s Fair Political Practices Commission revealed just the day before the election that the source of the donation was an obscure Arizona non-profit, and the source of the Arizona non-profit’s funding was a Virginia non-profit that does not reveal its donors.

According to Lange, “Campaign finance has become much more complicated since Citizens United” — the landmark Supreme Court case that prohibited government restrictions on campaign spending — “but our disclosure laws have not kept up. If we can’t limit how much these groups can spend, then we need to make sure that that spending is as transparent as possible.”

Land also pointed out that, had the law passed, Californians who viewed a deluge of advertisements against Proposition 37 — a failed ballot initiative that would have required all genetically modified food to carry a label to that effect — would have seen that the three largest donors to the campaign against the initiative were the huge industry players Monsanto, Dupont, and Pepsico.

The bill passed the Assembly with a supermajority in August, but ran out of time to come up for a floor vote in the Senate. Lange said that another version would be introduced in the next session.

Eliminating tax deductions for punitive damages

Under California law, individuals and corporations are allowed to take a tax deduction not only for any compensatory damages they pay to a plaintiff but also for any punitive damages that have been imposed. That arrangement is one that many advocates say undermines the very idea of punitive damages.

Under California law, a defendant cannot be found liable in a civil case for punitive damages unless the fact-finder concludes that the defendant has engaged in oppression, fraud, or “malice,” the last of which includes conduct intended to cause injury or despicable conduct which is carried on with a “willful and conscious disregard of the rights or safety of others.” The fact-finder’s conclusion must be supported by “clear and convincing” evidence, a heightened standard from that which usually applies in civil cases.

The damages are levied both to punish the wrongdoer and to deter others from such wrongful conduct.

“Giving them a tax deduction is the opposite of punishing them,” said Mariko Yoshihara, the political director of the California Employment Lawyers Association.

Yoshihara said that, at the same time, the deduction also undermines the idea of a tax exemption, which “is supposed to reward good behavior, not bad behavior.”

In February, 2011, a proposed bill was introduced by Assembly Member Mike Feuer that would have ended the practice of giving a tax deduction for punitive damages. Because the bill would have meant that some taxpayers would have a higher effective tax rate, it required a supermajority to pass under Proposition 13. The bill did not gain any Republican votes and fell one vote shy of passing in January.

It is unclear whether another version of the bill will be introduced in the next session, though Yoshihara is hopeful. “This seems like complete common sense,” she said. “No matter how carefully the Democrats are treading with the supermajority, this is one we ought to be able to get through.”

Lowering the bar for local “parcel tax” increases

In addition to placing strict limits on how much local governments can raise their property taxes each year, the California constitution requires that any local tax levied for a specific purpose be directly approved by two-thirds of voters. The most common such tax is known as a parcel tax, which is flat fee assessed on each piece of property in a town or school district. Parcel taxes are typically levied to fund local school systems, but can also be used for other purposes, such as police and fire services and building maintenance. Since 1983, just over half of parcel tax initiatives have achieved the two-thirds requirement at the local level.

In contrast to the parcel tax, the state only requires a 55 percent vote to pass a bond measure for school funding; California Democrats have considered trying to lower the parcel tax requirement to 55 percent for several years. Because lowering the threshold would mean amending Proposition 13, which is part of the state’s constitution, California law requires that such a proposal be submitted directly to voters. However, a supermajority of the legislature could vote to place such a proposal on the ballot in 2014, avoiding the long and often expensive process of gathering signatures to place a measure on the state ballot.

In the this last election, voters approved 25 out of 49 parcel tax measures. If the threshold had been 55 percent instead of 66 percent, however, 37 would have passed, including seven that would have funded school districts.

Assembly Member Sandré Swanson introduced a bill that would have lowered the required majority to 55 percent on the ballot in February, 2011, but it fell two votes short of passing the Assembly in August.

State Senator Mark Leno has recently introduced legislation that would lower the threshold to pass parcel taxes for school districts to 55 percent. In a statement, Leno said, “This change in law would give voters the power to make decisions about public education at the local level, allowing schools much-needed flexibility to improve instruction; fund libraries, music, the arts or other programs; or hire more teachers to reduce student-to-teacher ratios.”