California's secretary of state announced Tuesday that a tax-chopping proposition — one backers have spent years trying to put before voters — is now officially eligible for the November ballot. Come fall, anti-tax advocates and real estate developers may have reason to rejoice; city governments, public sector unions and the city of Los Angeles could have reason to worry.
The qualification announcement for a real estate-oriented constitutional amendment also gives California's Democratic lawmakers reason to start frantically negotiating toward a deal to keep the measure off the ballot entirely, even though the measure’s backers publicly say they aren’t interested.
Branded the “Local Taxpayer Protection Act” by its sponsor, the Howard Jarvis Taxpayers Association, the newly eligible measure would both sharply cap municipal transfer taxes — fees slapped on real estate sales — and make it harder for voter-sponsored campaigns to raise taxes in local elections.
The measure would hit cities like Berkeley, San Mateo and Alameda — which rely on transfer taxes for a significant share of their funding — especially hard. According to an analysis by the nonpartisan Legislative Analyst’s Office, it would cost local governments “a couple of billion dollars” per year, with taxpayers collectively saving just as much.
Why this is also a fight about Los Angeles
But the focus of the debate, and arguably the primary target of the proposition, is Los Angeles and its controversial “mansion tax,” known as Measure ULA.
Since becoming law in 2023, the voter-backed policy has levied a 4% tax on real estate sales over $5 million and 5.5% on those above $10 million — thresholds that have since inched up to match inflation. The tax has raised more than $1 billion in three years. Last week, the city announced a $360 million award for future affordable housing projects.
But real estate interests, some elected officials in Los Angeles and a growing number of academics say the tax has triggered a sharp slowdown in new construction, including of affordable housing, across the city, compared to neighboring cities. The levy falls not just on mansions, but apartments, condos, multi-use and commercial developments, too.
The resulting ire among developers, investors and business groups over the Los Angeles tax fueled the statewide proposition campaign, said Jon Coupal, president of the Howard Jarvis Taxpayers Association, a conservative group best known for its landmark property tax limiting measure Proposition 13. “I think ULA was not just the straw that broke the camel’s back, but the redwood tree that broke the camel’s back,” he said.
The statewide proposition would trim transfer taxes to just one-twentieth of 1% of a real estate sale’s value. Measure ULA’s top rate is 100 times higher. It would also require some voter-initiated tax measures to clear a two-thirds threshold rather than a simple majority. In Los Angeles, measure ULA passed with 58%.
If the tax-chopping proposition passes, Measure ULA is first on the block.
But that’s a big “if.” More than 57% of likely voters, including a majority of Republicans, opposed the initiative when shown its title as it would appear on the ballot, according to a recent poll by the Public Policy Institute of California.
On your mark, get set … haggle!
There’s also a chance the measure won’t even make it onto the ballot.
Under California election law, sponsors can still yank a measure back after gathering enough valid signatures before the official qualification deadline of June 25. In prior election cycles, that window has become a bonanza of backroom dealing in Sacramento as Democratic lawmakers scramble to muscle unwanted measures off the upcoming ballot and deal-hungry interest groups line up to extract concessions.
A notable example: In 2018, the soda industry funded a ballot measure that would have made it harder for local governments across the state to raise taxes. They pulled it at the last minute, but only after lawmakers begrudgingly agreed to pass a 13-year ban on new soda taxes.
At the end of last year’s legislative session, a group of Southern California Democrats, working alongside Los Angeles Mayor Karen Bass and former state Assembly Speaker Bob Hertzberg, launched a last-minute effort to exempt new apartment developments from the L.A. tax, while adding some new flexibility on how the money could be spent. The bill had a broader purpose too: It would have only taken effect if the Howard Jarvis Taxpayers Association removed its measure.
In the face of pushback from both business groups on one side and arch defenders of Measure ULA on the other, the effort fizzled. But now that the Howard Jarvis measure is officially headed for the ballot, Sacramento legislators may feel newly inspired to deal. Even if the electoral odds are ultimately stacked against the proposition, Democratic lawmakers and left-leaning campaign funders would be happy to avoid a costly defensive campaign.
Let’s make a deal?
In the meantime, changes may be coming out of Los Angeles itself.
Earlier this year, Councilmember Nithya Raman, who is hoping to unseat Bass as mayor, introduced a measure that would have put a series of Measure ULA changes on the June ballot. By exempting new development, it reflected many of the changes proposed in last year’s unsuccessful state bill. But a majority of the council punted.
The council instead delegated the question to a select committee chaired by Councilmember Ysabel Jurado, tasking it with recommending changes to the tax. Some of those changes would require voter approval and could go before voters in November, on the same ballot as the Howard Jarvis proposition.
The committee will also consider a set of tweaks to the law proposed by city staff that would clarify that nonprofit affordable developers are exempt from the tax, while making it easier for developers to pair ULA funds with other sources of funding. City staff say those changes could happen without going back to voters.
Tenant rights groups, some affordable housing developers and trade unions support those changes, but are urging the committee to otherwise leave the tax alone. A coalition of developers, “Yes in My Backyard” advocates and unionized carpenters has popped up to urge the city to consider a broad “fix” — before state lawmakers or anti-tax advocates do that work for them.
“We think it's really important to show that we can drive reform locally,” said Sarah Dusseault, a former city homelessness official who is now co-leading the “Mend It, Don’t End It” campaign. Making those changes locally “will go a long way to prevent more drastic measures.”
Measure ULA’s defenders counter that nothing the city or the state does will be enough to convince the Howard Jarvis Taxpayers Association to pull its measure.
“We’ve tried to negotiate with the funders of the measure and, both publicly and privately, they’ve been consistent that they have no intention to pull the measure,” said Joe Donlin, director of the United to House L.A. coalition. “They don't want to change taxes, they want to eliminate them.”
Coupal, from Howard Jarvis, agreed that the proposition is not a bargaining chip. “The folks on our side cannot envision any kind of deal that would give us the kind of solace that we would need,” he said.
But campaigns are expensive. Though the proposition campaign has been led by the Howard Jarvis Taxpayers Association, much of the funding has come from the California Business Roundtable, a coalition of major businesses in California, along with a smattering of commercial real estate companies, developers and landlord groups in Los Angeles. For now, the business roundtable says this dispute should be settled by voters. In the coming months, would any of them be willing to cut a deal with desperate Democrats in exchange for dropping their support?
Some legislators in both Sacramento and Los Angeles are eager to find out.
This article was originally published on CalMatters and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.
