In a significant ruling, the California Supreme Court has sided with Governor Gavin Newsom and Democratic leaders in the Legislature, preventing a business-backed anti-tax measure from appearing on the November ballot. The Taxpayer Protection and Government Accountability Act, sponsored by the business community, aimed to make it more difficult to raise taxes in California, including requiring voter approval for any new or higher state tax.

The lawsuit, filed by Newsom and legislative leaders last fall, argued that the measure would illegally revise the state constitution and impede the functioning of essential government services. In a unanimous decision, the Supreme Court agreed and ordered Secretary of State Shirley Weber to refrain from including the initiative on the ballot.

Highlighting the significance of the ruling, Justice Goodwin Liu wrote that while the proposed changes fall within the electorate's purview, they would substantially alter the basic plan of government and therefore cannot be enacted through an initiative. This marks the first time in over two decades that the court has struck down an initiative from the ballot, the last occurring in 1999 with a measure attempting to limit state officers' pay and transfer redistricting power.

Critics have scrutinized the court's decision, noting that six out of the seven members were appointed by Democratic governors, including three by Governor Newsom. Proponents of the anti-tax measure argued that the ruling endangered direct democracy in California, accusing the court of prioritizing politics over the Constitution.

Rob Lapsley, president of the California Business Roundtable, Jon Coupal, president of the Howard Jarvis Taxpayers Association, and Matthew Hargrove, president and CEO of the California Business Properties Association, issued a joint statement calling the ruling "the greatest threat to democracy California has faced in recent memory." They claimed that businesses in the state and across the country would be discouraged from investing and creating jobs due to political influence blocking ballot measures that challenge the government's ability to raise taxes and increase spending.

Despite the setback, Governor Newsom's spokesperson stated that he believed in the sanctity of the initiative process but acknowledged the Supreme Court's decision on the measure's illegality. In his opinion, Justice Liu recognized the unusual nature of the pre-election review and highlighted the retroactive provision within the initiative that could invalidate existing taxes, making post-election consideration even more challenging.

The Taxpayer Protection and Government Accountability Act aimed to crack down on what its proponents considered loopholes in existing tax accountability measures. It was heavily supported by the real estate industry and a private ambulance company, both of which frequently faced tax disputes with local governments. The proposed changes included increasing the threshold to pass a voter-initiated special tax at the local level from a simple majority to two-thirds, restricting officials' calculations of fees that fund public services, and reclassifying some charges as taxes. Critics argued that these changes could destabilize California's government operations, impeding administrative agencies from setting levies and requiring voter approval for adjustments.

Cities, counties, and employee unions expressed concerns that the initiative would severely impact their budgets and compromise their ability to provide crucial services. They lauded the court's decision as a warning to powerful corporate interests that they would be held accountable to follow the law.

Opponents of the initiative argued during a court hearing that the measure fundamentally restructured the government instead of amending tax laws in the constitution. They contended that such substantial changes could only be proposed through a two-thirds vote by the Legislature or a constitutional convention. Proponents insisted that public participation in legislative decisions was necessary and urged the court not to intervene in a political conflict that should be resolved by voters.

Now, Democratic lawmakers face a decision on whether to proceed with a competing measure placed on the November ballot last year as a counter to the California Business Roundtable initiative. The legislative measure, if approved, would require any changes to the threshold for approving state and local taxes to pass by a two-thirds margin, ensuring a high hurdle for the anti-tax initiative to become law.

The court's ruling has sparked controversy, with Republicans condemning it as partisan politics that disregarded the more than a million voters who signed the petition to put the initiative on the ballot. Senate Minority Leader Brian Jones, a San Diego Republican, expressed disappointment, stating that the court had failed in its duty to the people and the democratic system, yielding to pressure from Governor Newsom and legislative Democrats.

With the future of tax policy in California remaining a contentious topic, it is now up to lawmakers to navigate the path forward before the June 27 decision deadline.