Tag Archives: Taxes

Taxes Disguised as Fees Raiding Your Pockets

The California Supreme Court accepted for review on October 14, 2020, Howard Jarvis Taxpayers Association vs. Bay Area Toll Authority. Those who recall the 2018 epic battle pro and con Regional Measure 3 (RM3), which raised bridge tolls by $3, might not be surprised.

The Court granted and held the HJTA case pending disposition of a similar case, Zolly v. City of Oakland. So, it will be a while.

The basic issue with RM3 is whether it is a fee – as supporters claim – or a tax — as opponents point out. RM3 passed with 55% voter approval. Article XIII, Section 3 of the California Constitution requires two thirds approval for passage of a tax.

Article XIII, Section 3 is the Constitutional Amendment approved by voters November 2010 as Proposition 26. Prop 26 was intended to put a break on the proliferation of taxes and fees emptying the pockets of California residents.

Difference Between a Tax and A Fee

Article XIII, Section 3 says any charge is a tax except what the Section specifically says is a fee:

“(b) As used in this section, “tax” means any levy, charge, or exaction of any kind imposed by the State, except the following:

(1) A charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the State of conferring the benefit or granting the privilege to the payor.

(2) A charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the State of providing the service or product to the payor.

(3) A charge imposed for the reasonable regulatory costs to the State incident to issuing licenses and permits, performing investigations, inspections, and audits, enforcing agricultural marketing orders, and the administrative enforcement and adjudication thereof.

(4) A charge imposed for entrance to or use of state property, or the purchase, rental, or lease of state property, except charges governed by Section 15 of Article XI.

(5) A fine, penalty, or other monetary charge imposed by the judicial branch of government or the State, as a result of a violation of law. “

(Article XI, Section 15, of the California Constitution refers to “revenues derived from taxes imposed pursuant to the Vehicle License Fee Law.”)

The Problem With RM3

Regional Measure 3 exacts a charge to motorists crossing the Bay Area’s State-owned bridges. But revenues derived from that charge are not limited to benefiting motorists by building highways or fixing potholes. The bulk of RM3 revenues benefits users of other modes of transportation, like public transit riders, bicyclists, and walkers.

RM3 is intended to fund a wide variety of improvements to Bay Area mobility. Therefore, the measures’ charge to motorists exceeds the cost of benefits received by motorists.

The use of revenues derived from RM3 make the measure clearly a tax, according to Clauses 1) and 2) of Section 3, Article XIII.

Proponents’ Argument

What argument could proponents of Regional Measure 3 make in view of Clauses 1) and 2)?

Aside from arguments that amount to we want the money, proponents argue that RM3 falls under Clause 4), a charge to enter or use state-owned property. They also argue that Clause 4) is not subject to the relationship of charge to payer vs. benefit to payer as are Clauses 1) and 2). Clause 4) does not have the wording on charge vs. benefit that Clauses 1) and 2) have.

Enter Zolly vs. City of Oakland

Robert Zolly, owner of an Oakland apartment building, joined two other small-property landlords in suing the City of Oakland. The lawsuit claims that the city’s fee for hauling garbage far exceeds the cost of hauling said garbage. Indeed it does, because the haulers’ franchise costs are included in the garbage-collecting fee. A portion representing the haulers’ franchise pass through is placed in Oakland’s general fund to cover expenses not related to garbage collection.

The Court sees a comparison between using garbage-hauling fees to fund general city services, and using bridge tolls to fund public transit and other modes of mobility. A strict adherence to Article XIII, Section 3 would render such use of funds unconstitutional.

Bigger Issues

Regional Measure 3 is the brainchild of the Bay Area Metropolitan Transportation Commission (MTC). MTC is an agency easy to dislike. Its commissioners are appointed, not elected. However, MTC’s power to determine the destiny of the San Francisco Bay Area keeps growing.

Although MTC is a transportation agency, it is deeply involved in housing policy. Its Committee to House the Bay Area (CASA) has been a powerful influence behind state and local legislation dealing with evictions, rent caps, rent assistance, and other housing-related mandates.

There is a crucial difference between Regional Measure 3 and Measures 1 and 2. RM3 carried a mandate that all nine Bay Area Counties had to place RM3 on their ballots whether they liked it or not, and passage was based on votes aggregated from all nine counties. More of this strategy should be expected, as indicated by plans to place Faster Bay Area on a future ballot. RM3 contributed to the ongoing blurring of what a legal voters’ jurisdiction is supposed to be.

Your Pockets Are At Peril

There are pitfalls inherent in the kind of “regional planning” exemplified by RM3. If the Court sides with RM3 proponents, extracting money from Bay Area residents will become a lot easier. Proposals for tax increases disguised as fees will rain upon all our heads.