Court Upholds Constitutionality of Prop. 63

In Jensen v. Franchise Tax Board (here), the Court of Appeal upheld the constitutionality of Proposition 63, a statutory initiative passed in 2004 that imposes a tax on incomes over $1 million to pay for expanding mental health services. The court held, not surprisingly, that "[a]n income tax may be rationally based on a taxpayer’s income level and ability to pay, and there is no need to show that a particular taxpayer personally benefits from a tax assessed for the public good." The court also held, again unsurprisingly, that "[t]axpayers earning more than $1 million annually do not comprise a 'suspect class' requiring a strict scrutiny constitutional analysis."

Part of Prop. 63 requires the State to maintain funding for mental health services at 2003 levels. The plaintiffs contended that this required the measure to be enacted as a constitutional amendment, not a statutory initiative. But the Court rejected the argument, stating that the funding requirements in Prop. 63 were not "cast in stone," as the plaintiffs contended. Because Prop. 63 can be amended by a two-thirds vote of the Legislature to further its purposes, it did not put the Legislature in an unconstitutional strait-jacket: "[i]f the mental health services funding requirements prove too onerous, the electorate or the Legislature may vote to diminish them in the future."