Stealth taxes have been part and parcel of public finance in Sacramento ever since Proposition 13 required a two-thirds legislative vote to raise new taxes.
Hidden taxes and dubious fees became so rampant that voters adopted Proposition 26 in 2010 to bring transparency and accountability to legislative (and local government) revenue raising. Prop 26 simply required that fees for services or direct regulation could be passed by a majority vote; anything else was a tax requiring a legislative supermajority or local voter approval.
But the revenue and regulation industry never sleeps.
The latest entrant into the State Capitol’s tax Whack-A-Mole is legislation by Assemblyman Richard Gordon, AB 1001, which makes numerous changes to the state’s Beverage Container Recycling law, also known as the “Bottle Bill.”
Prior to Proposition 26, manufacturers of most beverages that came in glass or plastic bottles or aluminum cans paid a “redemption fee” that provided the manufacturers with no direct benefit, and raised money far beyond that necessary to pay for the beverage container recycling regulation. In a post-Prop 26 world, such a fee would clearly constitute a tax.
Recycling proponents want to expand the program to capture larger categories of fruit and vegetable juice beverages, and to include cardboard containers, juice bags and other innovative containers. But subjecting these new containers to a “redemption fee” would trigger a two-thirds vote.
What to do?
Introduce a new concept into the tax lexicon: pay-or-play.
To sidestep the higher vote threshold, Assemblyman Gordon instead gives manufacturers a “choice.” Either submit to a punitive new recycling mandate that applies exclusively to these new products or “voluntarily” submit to the existing redemption tax regime.
That’s like telling a passerby to voluntarily hand over your wallet or I’ll pick your pocket.
Although Legislative Counsel has signed-off on this gimmick, it hardly passes the smell test. After all, if this approach is acceptable, then almost any targeted business tax would be kosher – as long as a related, exorbitant regulatory threat was held out as a consequence.
Can’t pass an oil severance tax? Make it an “option” to a confiscatory regulatory regime governing new hydrofracturing technologies.
Can’t pass a soda tax? Make it an “option” to an expensive and burdensome requirement to provide educational and health services about nutrition.
You can imagine the examples that would bubble up from local governments.
Give “pay-or-play” advocates points for creativity, but the device is artifice. If expanding the recycling program and its tax reach is good public policy, then it should stand on its own merits and face the legislative approval rules that the voters intended.
Follow Loren on Twitter: @KayeLoren