BILL ANALYSIS Ó
AB 1494
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Date of Hearing: April 15, 2015
ASSEMBLY COMMITTEE ON ELECTIONS AND REDISTRICTING
Sebastian Ridley-Thomas, Chair
AB 1494
(Levine) - As Amended April 7, 2015
SUBJECT: Political Reform Act of 1974: independent expenditure
tax.
SUMMARY: Imposes a 10 percent tax on specified independent
expenditures made in connection with candidates for elective
state office or state measures. Specifically, this bill:
1)Requires any committee that is required to file campaign
reports online or electronically, and that makes independent
expenditures of $1,000 or more in the last 90 days before an
election in connection with a candidate for elective state
office or a state ballot measure, to pay a tax at the rate of
10 percent of the amount of each such independent expenditure.
Requires the tax to be paid to the Secretary of State (SOS)
within five days of filing the report disclosing the
expenditure.
2)Provides that the funds derived from the independent
expenditure tax imposed by this bill shall be deposited in a
fund created by the SOS for the purpose of increasing
transparency in political campaigns, civic engagement, and
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voter registration and turnout. Requires the SOS, upon
appropriation by the Legislature, to allocate those funds to
the Fair Political Practices Commission (FPPC) for the
purposes of increasing transparency in political campaigns and
to local elections offices, through a competitive grant
program, to increase voter registration and turnout. Requires
the SOS to report to the Legislature and the Department of
Finance by March 31 of every year on the allocation and use of
these funds, and requires the SOS to post that information on
his or her website.
EXISTING LAW:
1)Creates the FPPC, and makes it responsible for the impartial,
effective administration and implementation of the Political
Reform Act (PRA).
2)Defines the term "committee," for the purposes of the PRA, to
include any person or combination of persons who directly or
indirectly makes independent expenditures totaling $1,000 or
more in a calendar year.
3)Defines the term "independent expenditure," for the purposes
of the PRA, as an expenditure made by any person in connection
with a communication which expressly advocates the election or
defeat of a clearly identified candidate, or the
qualification, passage, or defeat of a clearly identified
measure, or taken as a whole and in context, unambiguously
urges a particular result in an election, but which is not
made to or at the behest of the affected candidate or
committee.
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4)Requires all candidates and committees who are required to
file campaign reports in connection with a state elective
office or state measure to file those reports online or
electronically if the cumulative amount of contributions
received, expenditures made, loans made, or loans received is
$25,000 or more.
5)Requires general purpose committees, including political party
committees and small contributor committees, that cumulatively
receive contributions or make expenditures of $25,000 or more
to support or oppose candidates for any elective state office
or state measures, to file campaign reports online or
electronically.
6)Allows any committee or other person who is required to file a
campaign report to file that report online or electronically,
even if he or she is not required to do so. Provides that once
a person or entity files a campaign report or lobbying
disclosure report online or electronically, that person or
entity shall file all subsequent reports online or
electronically.
FISCAL EFFECT: Unknown. State-mandated local program; contains
a crimes and infractions disclaimer.
COMMENTS:
1)Purpose of the Bill: According to the author:
This bill is intended to create a tax on expenditures
by independent expenditure committees for the purpose
of funding programs that will increase civic
engagement, voter registration, and voter turnout.
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The turnout for eligible voters in the 2014 General
Election was the lowest in California's history.
According to the United States Elections Project,
California had the fourth lowest turnout in the
nation. California has 24.4 million eligible voters,
yet only 7.5 million Californians cast a ballot.
Approximately 7 million eligible California voters are
not even registered.
There are several reasons for this. One is the
dramatic increase in independent expenditure committee
spending. Several reports from regulatory agencies,
academic researchers, and nonprofit watchdogs have
been highly critical of independent expenditure
committees.
According to California Common Sense, independent
expenditure committees spent more than $220 million on
candidate races in California between 2000 and 2012.
Additionally, in just the top 20 2014 legislative
races, independent expenditure committees spent a
staggering $44 million.
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This has resulted in a deluge of mail that voters
receive from independent expenditure committees.
Additionally, much of the mail is negative and there
is no doubt that independent expenditure committee
mailers often disenfranchise voters. This bill will
require that the committees pay some of the cost of
reengaging voters.
2)Constitutional Issues: This measure could be interpreted as a
violation of the United States and California Constitutions'
guarantees to free speech. While the right to freedom of
speech is not absolute, when a law burdens core political
speech, the restrictions on speech generally must be "narrowly
tailored to serve an overriding state interest," McIntyre v.
Ohio Elections Commission (1995), 514 US 334.
State and federal courts have repeatedly held that the giving
and spending of campaign money involves the exercise of free
speech. The United States Supreme Court found in Buckley v.
Valeo (1976), 424 US 1, that any "restriction on the amount of
money a person or group can spend on political communication
during a campaign necessarily reduces the quantity of
expression by restricting the number of issues discussed, the
depth of their exploration, and the size of the audience
reached." The Supreme Court in Buckley ruled that expenditure
limits during a campaign were unconstitutional for this
reason. In the same case, however, the court upheld campaign
contribution limits, noting that "[b]y contrast with a
limitation on expenditures for political expression, a
limitation upon the amount that any one person or group may
contribute to a candidate or political committee entails only
a marginal restriction upon the contributor's ability to
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engage in free communication."
One of the restrictions considered by the Buckley court was a
provision that prohibited any person from making expenditures
exceeding $1,000 relative to a clearly identified candidate in
a calendar year. The court noted that the effect of the
provision was to "prohibit all individuals, who are neither
candidates nor owners of institutional press facilities, and
all groups, except political parties and campaign
organizations, from voicing their views 'relative to a clearly
identified candidate' through means that entail aggregate
expenditures of more than $1,000 during a calendar year." The
court found that restriction to be unconstitutional, finding
that the restriction on independent expenditures "fails to
serve any substantial governmental interest in stemming the
reality or appearance of corruption in the electoral process,"
while "heavily burden[ing] core First Amendment expression."
This bill does not prohibit independent expenditures, nor does
it limit the amount of money that a person or committee can
spend on independent expenditures. Nonetheless, by imposing a
tax on independent expenditures, this bill may nonetheless
heavily burden First Amendment rights, and thus may be
susceptible to a constitutional challenge. While the Supreme
Court has held that a "generally nondiscriminatory tax" on
activity protected by the First Amendment is permissible (see,
for example, Arkansas Writers' Project, Inc. v. Ragland
(1987), 481 U.S. 221), it seems unlikely that the tax proposed
by this bill would be considered to be nondiscriminatory,
since it is applicable only to independent expenditures, and
not to all advertising, or even to all campaign spending.
3)Proposition 34 and the Growth of Independent Expenditures: In
2000, the Legislature passed and Governor Davis signed SB 1223
(Burton), Chapter 102, Statutes of 2000, which became
Proposition 34 on the November 2000 general election ballot.
The proposition, which passed with 60 percent of the vote,
made numerous substantive changes to the PRA, including
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enacting new campaign disclosure requirements and establishing
new campaign contribution limits, limiting the amount that
individuals could contribute to state campaigns (ranging from
$3,000 to $20,000 per election at the time, depending on the
office).
A study done by this committee in 2006 and a subsequent report
by the FPPC in 2010 found that since campaign contribution
limits went into effect in California with the passage of
Proposition 34, the amount of campaign spending done through
independent expenditures increased by more than 6,000 percent
in Legislative elections, and more than 5,500 percent in
statewide elections. In hotly contested campaigns for seats
in the Legislature, it is not uncommon for spending through
independent expenditures to exceed the total amount of
spending by all candidates in the race. On the other hand,
prior to the enactment of contribution limits as a part of
Proposition 34, independent expenditures were relatively rare.
In the March 2000 and November 2000 elections, the last two
elections that were not subject to the Proposition 34 campaign
contribution limits, the total amount of money spent on
independent expenditures for all legislative races was less
than $500,000. By comparison, more than $47 million was spent
on independent expenditures for legislative races in 2014.
4)Independent Expenditures and Turnout: The author of this bill
contends that the increase in independent expenditures in
California elections is partially responsible for low voter
turnout in recent elections. The degree to which independent
expenditures affect voter turnout, however, is unclear. While
some academic research has suggested that negative campaign
advertising can depress turnout, other research has found that
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negative advertising has no effect, or even a positive effect,
on voter turnout. Furthermore, not all independent
expenditures are negative, and some academic research has
found that messages designed to mobilize voters can have a
small, positive effect on voter turnout.
5)Tax Applies to Certain Independent Expenditures Only: The
independent expenditure tax imposed by this bill would not
apply to all independent expenditures, but instead applies
only to independent expenditures that are required to be
reported pursuant to a specified provision of law. That
disclosure requirement applies only to independent
expenditures of $1,000 or more that are made (1) in connection
with a candidate for state office or a state ballot measure,
(2) in the last 90 days before the election, and (3) by a
committee that is required to file campaign reports online or
electronically. Independent expenditures of less than $1,000,
that are made in connection with local candidates or ballot
measures, that are made more than 90 days before the election,
or that are made by committee that is not required to file
campaign reports online or electronically would not be subject
to the tax imposed by this bill.
6)Arguments in Opposition: In opposition to this bill, the
American Federation of State, County and Municipal Employees
(AFSCME), AFL-CIO, writes:
AFSCME appreciates Assembly Member Levine's endeavor
to engage the electorate given the abysmal voter
turnout in the past few elections. However, we oppose
AB 1494. Though this bill is a creative attempt to
engage the electorate, it does not address voter
turnout because it limits the resources of those who
communicate with voters in marginalized and
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disadvantaged communities while unintentionally,
giving an advantage to the business interests and
billionaires who have the resources to pay a tax on
the money they spend in independent expenditure
campaigns. AB 1494 would establish a regressive tax
that will harm the organizations, like organized
labor, who advocate for greater participation in
low-income and minority communities, and would
continue to shift political power away from average
working men and women to the business elites.
7)Political Reform Act of 1974: California voters passed an
initiative, Proposition 9, in 1974 that created the FPPC and
codified significant restrictions and prohibitions on
candidates, officeholders and lobbyists. That initiative is
commonly known as the PRA. Amendments to the PRA that are not
submitted to the voters, such as those contained in this bill,
must further the purposes of the initiative and require a
two-thirds vote of both houses of the Legislature.
8)Double Referral: This bill is double-referred to the Assembly
Revenue & Taxation Committee.
REGISTERED SUPPORT / OPPOSITION:
Support
None on file.
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Opposition
American Federation of State, County and Municipal Employees,
AFL-CIO
California Labor Federation
California School Employees Association, AFL-CIO
California Taxpayers Association
Howard Jarvis Taxpayers Association
Service Employees International Union, California State Council
Analysis Prepared by:Ethan Jones / E. & R. / (916) 319-2094
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