California Ballot Measure to Reinstate Two-Thirds Vote for Local Taxes Qualifies for November Election

A new ballot initiative aimed at significantly tightening the rules for local tax increases in California has officially qualified for the November 3 general election ballot. The measure, titled the Local Taxpayer Protection Act, would amend the state constitution to require two-thirds voter approval for all local special taxes and would prohibit most new taxes on real estate transactions. The initiative, sponsored by the Howard Jarvis Taxpayers Association (HJTA), represents the latest chapter in the long-running battle over Proposition 13, the landmark 1978 measure that fundamentally reshaped California's fiscal landscape. If passed by voters, the act would close what its proponents describe as a critical loophole that has allowed local governments to pass certain taxes with a simple majority. At the heart of the proposed measure is a 2017 California Supreme Court decision, California Cannabis Coalition v. City of Upland. According to the HJTA, that ruling created an exception to Proposition 13’s original mandate that all special taxes—those with revenues dedicated to a specific purpose—must be approved by a two-thirds supermajority. The court’s decision suggested that tax measures placed on the ballot through citizen initiatives, rather than by government bodies like a city council, might only require a simple majority to pass. Critics argue this has led to special interest groups funding signature-gathering campaigns for tax hikes that benefit them directly. The Local Taxpayer Protection Act seeks to eliminate this distinction entirely. It explicitly states that all local taxes for a special purpose require a two-thirds vote to pass, regardless of whether they are proposed by a government entity or a citizens' initiative. Beyond closing the so-called "Upland loophole," the initiative takes direct aim at real estate transfer taxes. It would prohibit new transfer taxes on property sales, with the exception of the modest 0.11% documentary transfer tax that was permitted before Proposition 13. Furthermore, the measure would retroactively repeal existing real estate transfer taxes that exceed this limit, including high-profile levies like Measure ULA in Los Angeles, which imposes a substantial tax on high-value property sales. The repeal of these existing taxes would become effective on December 31, 2028. This is not the first time supporters have attempted to fortify Proposition 13. A previous, more expansive initiative known as the Taxpayer Protection Act was removed from the ballot by the California Supreme Court after being challenged by the governor and state legislature. The court ruled that the earlier measure amounted to a fundamental "revision" of the state constitution rather than an amendment. According to the HJTA, the new Local Taxpayer Protection Act was drafted more narrowly to address the court’s concerns. It focuses specifically on loopholes related to property taxes and special taxes, avoiding the broader changes to fees and other government charges that the court took issue with in the previous version. Proposition 13, passed in 1978, capped local property taxes at 1% of a property’s assessed value at the time of purchase and limited annual increases in that assessed value to no more than 2%. This had the immediate effect of slashing local government property tax revenue by approximately 60%, according to the California Legislative Analyst's Office. As a result, municipalities became increasingly reliant on other revenue sources like sales taxes, hotel taxes, and impact fees on new construction to fund services. The measure applies equally to residential and commercial properties, creating a system where tax liability is tied to the original purchase price rather than current market value. Proponents argue the new measure is necessary to restore the original intent of Proposition 13 and protect property owners and businesses from escalating local taxes. Opponents are expected to argue that it will severely hamper the ability of cities and counties to fund essential services like public safety, infrastructure, and schools by making it much more difficult to raise dedicated revenue streams. For California business owners, the Local Taxpayer Protection Act represents a potential return to the certainty that Proposition 13 originally promised. The constant threat of new special taxes passed by slim majorities creates significant planning challenges. In our experience, unpredictable tax hikes, especially steep real estate transfer taxes like Measure ULA, can derail acquisitions, stall development, and complicate long-term financial forecasting. This initiative could level the playing field and curb the use of loopholes by local governments scrambling for revenue. However, navigating California's tax environment remains a complex task. Proactive planning is essential, regardless of the outcome in November. This is precisely the kind of evolving regulatory landscape where professional guidance is critical. Our firm specializes in tax preparation and compliance, helping businesses understand their obligations and strategize around measures like this one. To ensure your business is prepared for these potential changes, contact C&S Finance Group LLC at csfinancegroup.com. With the measure now set for the November ballot, both sides are preparing for a vigorous campaign. Business groups and taxpayer advocates are expected to line up in support, while local governments, public employee unions, and advocates for social services will likely form a coalition in opposition. The outcome of the vote will determine the future of local government finance in California for years to come.