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Friday, January 24, 2003


Car Tax referendum?

California's budget battle was just racheted up a large notch. I didn't hear it myself, but this post indicates that State Senator Tom McClintock was just on the John & Ken radio talk show (KFI AM 640) an hour ago, and he threatened to lead a referendum against any hike in the Vehicle License Fee.

The Democrats are anxious to raise taxes to fill the enormous hole in California's budget, and the Vehicle License Fee (a.k.a. the VLF or Car Tax) is their favorite candidate. Not only would it raise an estimated $4.2 billion dollars over the next 18 months, but the increase can arguably be accomplished without the normal requirement for a 2/3 supermajority in the state legislature. That's because of an ambiguous provision in the original 1998 bill which lowered the tax; that provision allows the tax to go back up to its original level if the State finds itself with "insufficient monies" (without defining that condition). Hence Democrats argue that this would be a tax restoration rather than a tax increase. Republicans had promised to challenge that interpretation in court, but their chances were somewhat iffy (especially since California's court system is also facing potential budget cutbacks).

A referendum in California is difficult to pull off, given the extremely short circulating period (90 days from signing of the bill to verification of signatures) and the high cost and the technical barriers (e.g., the entire text of the bill, however long it may be, must be attached to each individual petition section). But it can be done and has been successfully done in the past. If all the taxpayer organizations (like the Howard Jarvis Taxpayers Association) swing into action behind Tom McClintock, I have no doubt that it will be done again.

That puts Democrats between a rock and a hard place. Do they go ahead and try to "restore" the Vehicle License Fee, knowing that it will almost certainly result in a referendum? If enough signatures are gathered, such a referendum will prevent the Car Tax hike from taking effect until the next statewide election (normally the March, 2004 presidential primary). But Governor Davis would almost be forced to call a special election sometime later this year. Politically, how could he argue that the Car Tax hike he had signed to help solve this year's deficit could now wait until next year, just to save a few million dollars in election expenses?

Even worse for the Democrats, any initiative measures that had already qualified for the March, 2004 ballot would also have to appear on that same special election ballot. That means Ward Connerly's Racial Privacy Initiative would share the ballot. Liberals were hoping that an exciting Democratic presidential primary and a dull Republican presidential primary would help defeat that initiative in March, 2004. But conservatives, who would be drawn to a special election to defeat a Car Tax hike, would likely help pass the Racial Privacy Initiative and vice versa.

All in all, it's a brilliant chess move by Tom McClintock. I can't wait to see what happens next.

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