Proposition 43 is a taxpayer protection measure that makes it harder to raise local special taxes, such as sales taxes, that are earmarked for a specific purpose. But Prop. 43 is nothing new. It merely restores what California voters have approved three times in the past but what was taken away by questionable court rulings.
For years, California’s Constitution was understood to require two-thirds voter approval for local special taxes. That understanding began to change after the California Supreme Court’s 2017 decision in California Cannabis Coalition v. City of Upland. Although Upland concerned the timing of an initiative election, the court distinguished between taxes imposed by local government and those proposed by voters through the initiative process. Subsequent decisions applied that reasoning to the two-thirds vote requirement for special taxes.
The result is a loophole at the center of Proposition 13. While a city council or county board of supervisors needs two-thirds voter approval to pass a special tax, an initiative proposing the identical tax can pass with a simple majority. Proposition 43 would close that loophole for voter-proposed local special taxes approved after January 1, 2027. Several tax increase proposals on this November’s ballot show why this protection is important for the future.
For example, the Regional Transit Measure (RTM) would impose a sales tax increase across five counties for 14 years, adding one-half percent in Alameda, Contra Costa, San Mateo, and Santa Clara counties and one percent in San Francisco. The Metropolitan Transportation Commission estimates that the measure would raise approximately $980 million annually. At that rate, collections over three full years would total approximately $2.9 billion.
The Legislature laid the groundwork through Senate Bill 1037, creating the Public Transit Revenue Measure District and authorizing either the governing board or initiative proponents to place the tax before voters. Proponents used the initiative process and gathered enough signatures to qualify for the November ballot. That choice matters. For organized interests seeking to hijack the tax base without obtaining two-thirds support, the Upland loophole offers a practical way to do it.
El Dorado County’s Measure S shows how this can work when a campaign’s sponsor also stands to benefit from the revenue. Measure S would impose a three-eighths percent countywide sales tax for 30 years. It is expected to generate approximately $13 million annually for hospital improvements, fire protection, wildfire prevention, and emergency response. The measure qualified through the citizens’ initiative process. Its supporting campaign is sponsored by Marshall Medical Center, which the campaign also identifies as its top funder. According to the campaign’s own website, Measure S revenue would support $125 million in bond issuance for Marshall’s capital improvements.
Whether first responders receive adequate funding is a separate question. Here, the institution sponsoring and financing the campaign also stands to benefit from the tax revenue. That is far removed from the familiar picture of ordinary citizens banding together to challenge an unresponsive government.
Berkeley offers another example, this time involving citizens using the initiative process to tax the distribution of sugary drinks in the name of public health. Measure AA would replace the city’s existing one-cent-per-ounce general tax on sugar-sweetened beverages with a two-cent-per-ounce special tax dedicated to public health, nutrition, and water access.
Los Angeles has already seen the consequences of the Upland loophole in its slower real estate market, impacting property tax revenues. In 2022, a citizens’ initiative placed a punitive tax on real estate transfers on the ballot. Measure ULA imposed a 4 percent tax on the sale price or value of real estate transfers exceeding $5 million and a 5.5 percent tax on transfers exceeding $10 million, for the special purpose of affordable housing and homelessness prevention programs. ULA received 57.77 percent of the vote, well short of two-thirds, but the courts said that was enough because the measure reached the ballot through the initiative process.
The cost of these court decisions is getting higher with every election. Approval of Proposition 43 will finally close the Upland loophole, restore the two-thirds vote, and make it harder to raise taxes.
Jon Coupal is president of the Howard Jarvis Taxpayers Association