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Bill sets stage for income taxes AB 1690 was approved by the Assembly late Wednesday on a 41-35 vote. Supporters claim the measure would provide fiscal insurance for cities facing economic instability, but opponents say taxes already are too high. "Quit stealing the people's money," said Assembly Member Jay La Suer, R-La Mesa. "Just because you don't use a gun, you use the law, doesn't mean you're not a thief." Assembly Member Mark Leno, the San Francisco Democrat who proposed AB 1690, said the legislation simply extends the notion of local control. The bill would authorize, but not require, cities and counties to consider imposing such a tax to supplement public-safety services. Voter approval would be required, but local governments could set the threshold at a simple majority or a supermajority, Leno said. "It's just a tool to use when necessary," he said of the tax. Cities and counties would have flexibility in structuring the tax: They could make it temporary, for example, or mandate that it apply only when revenues drop to a certain level, Leno said. The bill is co-written by John Burton, president pro tem of the Senate, which now must consider the legislation. No precise estimate of potential proceeds is available. Statewide, $3.4 billion could be raised if every city and county imposed the maximum tax, officials said. California would join at least 12 other states -- including New York and Pennsylvania -- that offer some form of local income tax option. AB 1690 is a direct response to shaky financial times that directly affect city and county budgets, Leno said. Critics claim AB 1690 violates the spirit of Proposition 13, which requires that taxes for a specific purpose, such as public safety, must be approved by a supermajority of affected voters. "This is going around the voters," said Assembly Republican leader Dave Cox of Fair Oaks. "This is an attempt to lower the threshold." Under AB 1690, local income taxes would represent a percentage of a wage earner's state income-tax liability. Cities could impose a tax of up to 8% and counties up to 2% of the amount an individual owes in state income taxes. If local governments adopted the maximum possible tax, Californians earning less than $100,000 per year would pay about $70 annually, Leno said. The bill is the brainchild of California Professional Firefighters, and it requires that public safety services be enhanced in any city or county imposing such a tax. The formula for doing so, however, is roundabout and apparently designed to avoid requiring a supermajority vote, critics say. Here's how AB 1690 would work: Californians would pay their local income tax to the Franchise Tax Board, just as they currently do with state taxes. The local revenue would then be transferred to the appropriate cities and counties as discretionary funds -- but with a catch. For every dollar gained from the local income tax, cities and counties must transfer 50 cents in other funds to supplement public-safety programs. Public-safety finance agencies would be formed in participating jurisdictions to serve as a conduit for the transfer. Impacts on local government would be the same as merely designating 50% of the income tax proceeds to public safety. But the distinction may have important legal ramifications. By not channeling the new proceeds directly into public safety, the income tax may avoid being deemed a "special tax" subject to a two-thirds vote.
"It's a shell game and a fairly blatant violation of Proposition 13," said Jon Coupal, president
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