A Lesson for California From King George III

“For 10 years, King George and his Parliament have gulled, cullied and diddled these colonies with their illegal taxes--Stamp Acts, Townsend Acts, Sugar Acts, Tea Acts,” the character John Adams complains in the play, “1776.” He should have seen California’s so-called smog impact fee.

The year was 1990. State expenditures had doubled during the roaring 1980s, and now the recession had arrived and the cupboard was bare. Instead of reducing expenditures, the state responded with new taxes. Among them was a smog impact fee, a $300 tax slapped on every motorist who moved to California with the family car. It was one of those midnight bills--actually 46 minutes past midnight, in this case--that pass at the end of a legislative session with no public scrutiny.

There was one big problem with this tax: It was illegal, and the state knew it. The Legislature’s own legal counsel had warned legislators before they voted on it that it was unconstitutional on both state and federal grounds. Yet they adopted it anyway.

The law was a collection of lies. To evade the U.S. Constitution’s interstate commerce clause, it was called a smog impact fee, but it had nothing to do with smog; revenues were deposited into the state’s general fund. To subvert the state Constitution’s prohibition against such a tax, the Legislature declared that it was a “sales tax,” although it had nothing to do with sales.

Since 1990, families who have moved to California have been forced to pay $455 million in illegal taxes that the state was never entitled to collect in the first place.

In May 1998, a Superior Court told the state what the Legislature’s own legal counsel had already told it in 1990: The tax is illegal. On Oct. 1, the 3rd District Court of Appeal agreed. It was an illegal tax then; it is an illegal ‘tax now, and it has always been illegal.

And yet, the Department of Motor Vehicles has announced that it will continue to collect the tax, while the state attorney general drags the case, year by year, all the way to the U.S. Supreme Court. Even then, the DMV vows it will only give refunds for the last three years the tax was collected. And it will only refund money to those who jump through the bureaucratic hoops that the DMV will administer.

This is an outrage. It is an outrage that the state would drag this case out for years, when from the beginning its own lawyers told it the tax was illegal. It is an outrage that the state would hide behind a three-year legal statute of limitations for a tax that it knew it was never entitled to collect. It is an outrage that the DMV would require taxpayers to obtain and file bureaucratic paperwork to apply for a refund when the DMV has the records of every person who has paid the tax and could mail them their refunds immediately.

Finally, it is an outrage that the state would not pay the same interest that it charges taxpayers if the shoe were on the other foot. If the same taxpayer owed the state $300 in 1992, the state would charge him $557 with interest today.

Gov. Gray Davis could comply with the court order today, but thus far has refused to do so. Davis can learn from King George III’s experience. If he doesn’t act by the time the Legislature returns in January, legislation will be introduced to force him to return the money. In the meantime, he shouldn’t leave any tea shipments unattended.