California Legislature Advances Amendment to Mandate Two-Thirds Voter Approval for Local Special Taxes

SACRAMENTO — The California Legislature has passed a resolution to place a constitutional amendment on a future ballot that would require a two-thirds supermajority vote to approve all local special taxes, including those proposed through citizen initiatives. The measure seeks to close a legal ambiguity that has developed over the past decade, standardizing the threshold for raising targeted local revenues and escalating the long-running conflict between taxpayer advocates and municipal governments.

The proposed amendment, if approved by voters, would solidify the requirement that any tax imposed by a local government entity—including cities, counties, and special districts—for a specific purpose must be passed by at least 66.67% of the electorate. This move directly addresses a 2017 California Supreme Court decision that suggested the stringent two-thirds requirement might only apply to taxes proposed by local governments, potentially allowing citizen-led initiatives to pass with a simple majority.

This legislative action is the latest chapter in a multi-decade saga over tax limitations in California, which began with the landmark Proposition 13 in 1978. That initiative capped property taxes and established the two-thirds vote requirement for special taxes levied by local governments. The legal framework was further tightened in 1996 with the passage of Proposition 218, known as the “Right to Vote on Taxes Act.”

Proposition 218 amended the state constitution to require majority voter approval for any new or increased general taxes and explicitly reiterated the two-thirds supermajority for special taxes. A key impact of Proposition 218 was extending these voter approval requirements to California’s charter cities, which had previously argued their constitutional authority over municipal affairs exempted them from such rules. For nearly two decades, the two-thirds threshold for special taxes was broadly applied to measures originating from both government bodies and citizen petitions.

However, the 2017 court ruling created uncertainty, opening the door for unions and community groups to pursue special tax increases for specific projects like transportation, housing, or social services through the citizen initiative process, which faced a potentially lower bar for passage. This new proposal from the Legislature aims to eliminate that distinction, making the two-thirds vote a universal requirement for all local special taxes, regardless of their origin.

The Legislature’s move also comes on the heels of a significant legal defeat for taxpayer advocacy groups. Earlier this year, the California Supreme Court removed a separate, more sweeping anti-tax measure from the November 2024 ballot. That initiative, backed by the Howard Jarvis Taxpayers Association and the California Business Roundtable, was dubbed the “Taxpayers Protection Act.” It sought to amend the constitution to reclassify many government fees and charges as taxes and require two-thirds voter approval for all new local taxes.

The court unanimously ruled that the measure was an unconstitutional “revision” of the state constitution rather than a simple amendment because it would “fundamentally restructure the most basic of governmental powers.” By removing the initiative, the court prevented a major shift in California’s fiscal landscape but left the underlying debate unresolved.

For small and mid-sized businesses operating in California, the proposed amendment presents a complex scenario. A higher, standardized threshold for special taxes could provide greater predictability and stability, making it more difficult for local jurisdictions to pass targeted tax hikes that could increase operating costs. This could prevent new parcel taxes, sales tax add-ons for specific projects, or other levies that directly impact business finances.

Conversely, making it harder for local governments to raise funds for specific purposes could lead to underfunded public services and infrastructure—such as roads, public safety, and schools—that are critical for a healthy business environment. It could also compel local authorities to explore more complex and less transparent revenue sources, such as regulatory fees, fines, or assessments that are not explicitly defined as taxes, potentially creating new compliance burdens for business owners.

In our experience, while a higher barrier for tax increases sounds appealing to business owners, it rarely simplifies the fiscal environment. When one revenue path becomes more difficult, local governments are forced to find more creative, and often more convoluted, ways to fund essential services. This can lead to a patchwork of new fees, special assessments, and other charges that are harder to track, budget for, and contest than a straightforward special tax. The result for businesses is often not a lower burden, but a more complex and less predictable one. Navigating this shifting landscape requires proactive planning and a deep understanding of local fiscal policy, which is a core component of our tax preparation and compliance services. For companies looking to stay ahead of these changes, C&S Finance Group LLC at csfinancegroup.com provides the expert guidance needed to manage these evolving challenges.

Looking ahead, the constitutional amendment must now be approved by California voters. Its placement on an upcoming statewide ballot will likely trigger a major political campaign, pitting taxpayer advocacy organizations and business groups against public employee unions, local government associations, and advocates for public services. The outcome will determine the future of local government finance and the balance of power between voters and elected officials in the nation’s largest state economy.