February 6, 2009
Tax Foundation Argues to California Court of Appeals: Charging Taxpayers for Tax Collection is a Tax
Brief Concludes That San Diego's "Tax Collection Processing Fee" is Unconstitutional
Washington, DC, February 6, 2009 - In a friend-of-the-court brief filed with the California Court of Appeal, the Tax Foundation argues that a processing "fee," charged by the City of San Diego for collection of a tax on landlords who rent their property, should be seen as a tax, and therefore should be ruled unconstitutional because the tax was imposed without voter approval.
In arguing against a lower court's decision in Weisblat v. City of San Diego, Tax Foundation Tax Counsel Joseph Henchman reviews the standards for defining taxes and fees in California and throughout the country, and concludes that the charge is a tax because its purpose is to raise revenue for a quintessential government activity: tax collection.
"San Diego imposed the charge in response to a revenue shortfall, and the revenue funds no services to those who pay it," Henchman says, "nor does it confer any exclusive benefits or privileges to them, nor does the revenue from the charge fund any program that regulates the conduct of landlords or rental businesses."
California Proposition 218, approved by voters in 1996, mandates that local government not impose, extend or increase general taxes without approval by a majority of the electorate, and special taxes require a two-thirds vote. Contrary to the City of San Diego's assertion, the brief argues that whether tax collection is a "special project" or a general governmental enterprise does not alter the conclusion that the charge is a tax and not a fee.
"The California Constitution is designed to protect taxpayers from these types of shell games," Henchman states. "Labeling charges, like the one at issue in this case, as taxes enhances transparency and helps enable California citizens to better understand the cost of government."
Tax Foundation Fiscal Fact No. 160, "Charging Taxpayers for Tax Collection is a Tax: Weisblat v. City of San Diego" provides a summary of the brief, and can be found at http://www.taxfoundation.org/publications/show/24309.html.
The full brief can be found at http://www.taxfoundation.org/publications/show/24307.html.
The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937. Since 2007, the Center for Legal Reform at the Tax Foundation has participated as amicus curiae before the U.S. Supreme Court and appellate courts in five states in cases involving tax/fee distinctions, taxpayer protections, multiple taxation and tax discrimination, and the power to impose taxes.
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