Propositions 41 and 42: Bad ideas that threaten to hurt all Californians

California billionaires are sponsoring both Proposition 41 and Proposition 42, a pair of measures that will appear on the ballot for voter approval in November. As we will explain, the real purpose of these measures is to defeat Proposition 40, the billionaire tax. We have already written an editorial in the Daily Journal encouraging voters to approve Prop. 40. We hope, therefore, that it will not be too difficult to persuade anyone we convinced to vote for Prop. 40 to also vote against Props. 41 and 42.

Our main task in this editorial is to convince voters who are skeptical of Prop. 40 to nevertheless vote against Props. 41 and 42.

Though at first glance, both Prop. 41 and Prop. 42 seem to offer plausible, even boring, technical amendments, buried within each one is a provision to sink the billionaire tax. Because these provisions are contemptuous of voters and democracy generally, they should be defeated just to send a message that these kinds of tricks will never work on Californians.

And, appropriately, prominent editorial boards have urged a vote against both Props. 41 and 42. For instance, the San Francisco Chronicle called Prop. 41 "a cynical poison pill," and the editorial board for the Sacramento Bee and four other McClatchy papers wrote that the measures' backers "have created Prop. 41 and Proposition 42 to confuse voters."

But Props. 41 and 42 would do more than undermine Prop. 40 and California democracy. Each would add new complexity and uncertainty to California's budgeting rules and would make California's finances more precarious, convoluted and harder to reform. These propositions were drafted quickly with no apparent understanding or regard for how California public finance works and thus passing them would be to play Russian Roulette with many critical state and local programs.

The first, Prop. 41, seems to promise harmless "audits" of new state spending, but the audits it requires are expensive, redundant and will contain pro-privatization propaganda. Further, buried deep within it, Prop. 41 includes a provision that could paralyze California's fiscal system even beyond undermining Prop. 40. How Prop. 41 does that is complex. Briefly, for any new California funding to take meaningful effect, it typically must be enacted to exempt it from inflexible budget rules from the 1970s. Prop. 41 would arguably prohibit that approach. For example, had Prop. 41 been in effect, this might have blocked the 2016 increase in the tobacco tax, which included an exemption from this old and rigid budget rule to allow the money to be spent on early childhood development programs.

Prop. 42 is ostensibly about protecting retirement assets, though this is a deception, as those assets are under no threat from Prop. 40 or any other measure. But Prop. 42 does not just offer an expensive solution to a non-problem in order to deceive voters; it also threatens more harmful impacts. For example, it prohibits a tax on the "ownership or control" of "personal property." This broad definition is meant to undermine Prop. 40, as well as make it impossible for the Legislature to ever enact a wealth tax or expand the existing property tax. But its sloppy wording gives the very wealthy and their tax lawyers arguments that their capital gains income from sales of stocks would also be protected. This income from the sale of stocks is a major part of California's tax base, and Prop. 42 could thus eviscerate how California's income tax currently raises revenues from the most wealthy. Beyond that, Prop. 42 would also prohibit the Legislature from addressing important ways in which the super wealthy currently game to escape California's income tax, like stuffing billions of dollars into Roth IRAs, a tax-avoidance technique that Peter Thiel in particular is famous for.

In short, lawyers know the dangers of poorly drafted language. We explore more possible unintended consequences and in more depth here.

Now, as lawyers, you might wonder whether these propositions are permissible under California's single subject rule. We believe that these deliberately confusing combinations of disparate subjects are not, in fact, permissible. For portions of the basic argument, see "Voter Confusion and the Single-Subject Rule: Prop. 26 as a Test Case in Waiting, Part One in a Two-Part Series," UC Davis School of Law. That said, the courts are a backstop. No lawyer wants to go to court when straightforward sensible actions can eliminate the issue. That is the case here. Further, even if the courts one day save Californians from themselves, a dangerous precedent would have still been set.

Although debates about the billionaire tax have been widely reported, voters so far have heard little about Props. 41 and 42, and that is as the billionaires want it. All voters should reject these dishonest efforts to manipulate the ballot. And all voters should not risk California's public finance system by being tricked by ballot measures that would deliver poorly considered, and unnecessary, jolts to the fragile system we all rely on.

Prop. 40 is on the ballot: Vote against it if you must, but please don't do further damage to California's democracy and system of public finance.

The authors are drafters of Prop. 40. The views expressed in this article are those of the authors and do not express the views of their respective academic institutions.