COURT OPENS UP BIG PROP 13 LOOPHOLE FOR FRANCHISE FEES

Two recent court cases have created a contested loophole in property-tax related Propositions 13, 26 and 218 which would cause a legal and actual tax earthquake in California.

Cities like San Diego are starting to bid-out franchise fees to the highest bidder for use of its public streets by public utilities. This may be construed as tax farming, which was used in ancient societies to bring in unlimited taxes, which is the opposite intent of tax-limiting Propositions 13, 26 and 218.

San Diego has set a minimum reserve price of $62 million per year for 20 years for electric and gas utility use of its street rights of ways. An annual surcharge of 3% of the gross electric and gas revenues will be added to the $62 million. The existing franchise fees for the city were $47.8 million for 2020. The fees collected from Public Franchises would be deposited directly into the general funds of local government for whatever use they deem fit.

Attorney Tim Bittle with the Howard Jarvis Taxpayer’s Association explained in an email about what the future portends from these court rulings:

“…the potential afforded by this decision for the government to siphon money from the private economy is frightening….Exempt fees for use of public property could be imposed on shipments entering public ports, goods and passengers transported on public roads, water stored in public reservoirs, utilities located beneath or along public rights of way, cell phone calls relayed over towers on public ridges, internet traffic using public wi-fi networks, etc. Those fees could be set at any amount, and the revenue could go straight to the General Fund for tax-like expenditure, with no special approvals required. Such an outcome is contrary to voter intent.”

Ancient Rome and tax farming: In the provinces of Ancient Rome (Republic Era), think Gaul, Hispania, Israel etc., wealthy individuals, known as ‘Publicani’, would competitively bid and pre-pay the ‘taxes’ for a specific region in coinage. This gave the Roman Treasury a guaranteed income but as pre-payment it was a legal loan which generated interest.

The Publicani then collected, or hired collectors for, that region’s taxes in coin and barter. He had the responsibility/choice for converting the barter into coin after collection or storing the same. These tax collectors were notorious and hated about under-valuing the barter and overstating the tax burden. They did have the Roman Army and Judiciary at their back for the collections and had the most recent census to guide their commerce raids.

There was always a scandal going on in this process and some feuding families would push the bids high to force a rival to go broke in trying to collect, which, of course, was bad news for the actual tax payers. Before he became an Apostle, Saint Matthew was just that unpopular guy, sitting at a table with a couple of strong-arms, collecting too high taxes!

Guide for today? If it isn’t a tax, then it is not subject to a vote nor can you vote OUT the politician. A franchise fee is only controlled by a franchising commission which is generally appointed, not elected. The further a cost is displaced from the payer, the harder it is to dispute and clearly review. Politicians love it for just that reason!

Thank you for your comment. Prop. 13 set a 1% base tax limit to property taxes. The California Public Utilities Commission sets a 1% franchise fee for general law cities. A voter initiative could also limit franchise taxes to 1%, instead of an upfront multimillion dollar payment plus 3% of gross revenues per year.

Don’t tax you.
Don’t tax me.
Tax that man behind that tree.............

Death and taxes. Not much difference really, as taxation kills innovation, motivation, freedom and basically the very ability to get up and go. The dose makes the poison.

Your post reminded me of the Hadith about killing Jews hiding behind trees:

"The last hour would not come unless the Muslims will fight against the Jews and the Muslims would kill them until the Jews would hide themselves behind a stone or a tree and a stone or a tree would say: Muslim, or the servant of Allah, there is a Jew behind me; come and kill him; but the tree Gharqad would not say, for it is the tree of the Jews."

http://elderofziyon.blogspot.com/2016/03/jews-are-planting-gharqad-trees-to.html

Turns out, the topic of the "tree of the Jews" deserves its own thread. Thanks for the inspiration! :)

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