GET READY TO VOTE

• What’s at stake
• Understanding Prop. 41
• What supporters say
• What opponents say
• Fiscal impact
• Campaign financing 
• Read more

Proposition 41 would make it harder to pass new special taxes in California. It would require the state auditor to review any special tax proposal before it goes to voters, and it would count any new special tax that voters approve toward the state’s spending cap.

Opponents of Prop. 40, the proposed “billionaire tax,” placed this measure on the ballot.

What’s at stake

This measure would make it more difficult to raise taxes in the future.

Here’s how it would work: If successful, Prop. 41 would require the state auditor to assess any proposed new taxes. Before any public vote, the auditor would identify ways the program set to benefit from the tax increase could cut its spending by at least 10% each year. A summary of this audit would appear in the information guide that’s mailed to voters. Prop. 41 would also require new special taxes to count toward California’s spending cap.

Prop. 41 directly undermines Prop. 40, the proposed wealth tax on billionaires, which exempts its potential revenue from the spending cap. Both Prop. 41 and Prop. 42 were backed by Building a Better California, funded heavily by Google co-founder Sergey Brin. If either measure gets more votes than Prop. 40, Prop. 40 is canceled, even if it also passes.

Official title on the ballot: Prohibits New State Taxes That Exclude Revenues From State Spending Limit. Requires Audits for New State Special Taxes. Initiative Constitutional Amendment.

Language you will see:

Understanding Prop. 41

Prop. 41 targets special taxes, which raise revenue for a specific purpose, such as infrastructure or healthcare.

If passed, Prop. 41 would prohibit new special taxes from exempting their revenue from the state’s spending limit, established by a 1979 ballot measure. Critics say such exemptions are a way to pour more tax money into state coffers while sidestepping the “Gann Limit.” The Gann Limit is named after Paul Gann, an anti-tax activist, and it seeks to cap the amount of money the state can spend. (Its baseline is state spending in 1978-79, adjusted for inflation and population changes.) Whenever state revenues exceed this cap for two consecutive years, California must refund the excess directly to taxpayers and through education spending. This has only happened twice.

What supporters say

Supporters say key social programs aren’t getting enough money despite California’s high taxes. They argue the state auditor check would ensure programs that benefit from special taxes spend money wisely. They also want these taxes to count toward the state spending limit, which would make tax rebates to Californians more likely.

Notable supporters: Reform California, Google co-founder Sergey Brin, DoorDash CEO Tony Xu and Stewart Resnick, chairman and CEO of the Wonderful Company.

What opponents say

The chief opponent is SEIU-United Healthcare Workers West, which sponsors Prop. 40. The union argues that Prop. 41 is designed to trick voters into blocking a wealth tax on billionaires without realizing it. It says the measure isn’t really about auditing waste in public programs, but is instead a way for billionaires to avoid paying a one-time tax on their wealth.

Notable opponents: SEIU-United Healthcare Workers West, the California Democratic Party, California State PTA and the American Civil Liberties Union of Southern California

Fiscal impact

If passed, Prop. 41 would increase costs for the state auditor. But those costs would depend on how many new special taxes are proposed and approved, according to the Legislative Analyst’s Office, which estimates these costs would likely start in the low millions of dollars per year and would grow over time.

Adding audit summaries to voter guides would increase printing and mailing costs by “a few hundred thousand dollars” per initiative, according to that same analysis. That breakdown also adds that Prop. 41 could bring savings by requiring the state auditor to recommend ways that programs can cut costs, although those savings “would depend on future decisions and are not known.”

Overall, the Legislative Analyst’s Office determined that the “net fiscal effect of Proposition 41 is unknown as it depends on future decisions by voters, the Legislature, and other policymakers.”

Campaign financing 

Read more

• 5 tax measures are on the California ballot. Here’s how to make sense of them all (CalMatters)
• Prop. 40: The billionaire tax (LAist)
• Prop. 40: The billionaire tax could be defeated by two other tax measures (CalMatters) 
• Prop. 42: The initiative that could stop the billionaire tax in its tracks (LAist)
• Why Prop. 41 could make it harder for the state to meet the needs of future Californians (California Budget & Policy Center)