Local sales tax increase
In November 2013, voters in the city of Modesto, California, defeated a proposed 1% increase in the local sales tax by just 507 votes. Undeterred by this narrow defeat, Modesto’s mayor and city council will again ask voters to approve a local sales tax increase on this November’s ballot, albeit only 0.5% this time. Recently, this new proposal – known as Measure G – survived a legal challenge by a local taxpayer group.
California imposes a statewide sales tax of 7.5%. Counties and cities may add their own tax on top of this rate. For example, sales in Modesto are presently taxed at 7.625%, although the city only receives 0.75%. The remainder goes to the state and Stanislaus County. Measure G would make the total sales tax 8.125%, raising Modesto’s share to 1.25%.
Modesto Mayor Garrad Marsh told the City Council in June additional taxes were necessary to provide “police and fire services and the rest on economic development and other essentials.” City officials estimate the 0.5% increase will yield an additional $14 million annual revenue. Steve Christensen, Modesto’s budget director, also told the council a 7.625% sales tax would not be out of line for California, as 84% of the state’s cities currently impose higher rates.
Needless to say, not all Modesto residents are eager to pay more in sales tax. The Stanislaus Taxpayers Association, which led the campaign to defeat the 1% increase in 2013, filed a lawsuit in early August, specifically challenging the ballot language of Measure G. When Modesto voters go to the polls in November, they will see a measure titled the “Safer Neighborhoods Initiative,” which promises “To make neighborhoods safer by restoring police patrols, crime prevention, gang suppression and youth development efforts; removing tagging; reducing nuisance properties; strengthening fire/emergency services; increasing neighborhood collaboration; and maintaining other general city services.”
The problem, according to the Stanislaus Taxpayers Association, is that nothing legally requires Modesto to dedicate the additional sales tax revenue to these purposes. Indeed, Measure G proposes a general sales tax increase, as indicated by the reference to “other general city services” in the language above. California law does authorize a city to collect a “special sales tax,” which must be used for a stated purpose. However, special sales taxes must be approved by a two-thirds vote, while a general increase only requires a simple majority.
The taxpayer association’s lawsuit argued the language of Measure G, which was prepared by the Modesto City Attorney’s office, would mislead voters into thinking they were voting on a dedicated, special sales tax rather than a general increase. The taxpayers association added it was inappropriate to refer to Measure G as an “Initiative,” which in California elections traditionally describe a voter-sponsored ballot question, not one placed by a city government. Accordingly, the group asked a judge to direct the city to either adopt different language or drop the ballot question altogether.
The judge did neither. On August 21, Stanislaus County Superior Court Judge Timothy W. Salter rejected the taxpayer association’s lawsuit. According to the Modesto Bee, Salter said changing or dropping Measure G at this point “would substantially interfere with the county election office’s ability to conduct the countywide November election,” and in any event, he was not convinced the language adopted by the city attorney was “false or misleading.”
S.M. Oliva is a writer living in Charlottesville, Virginia. He edits the international legal blog PrivyCouncil.info