Pursuant to Elections Code Section 9005, we have reviewed the proposed constitutional initiative to impose a 1,000 percent sales tax on political advertisements (A.G. File No. 15-0061).

Background

Constitutional Free Speech Protections. The First Amendment to the U.S. Constitution limits the ability of governmental entities to abridge the freedoms of speech and petitioning government. Article I of the California Constitution also includes various protections for free speech and petitions. These constitutional provisions have been interpreted over the years in many court cases, including cases about laws related to political campaigns.

Significant Sums Now Spent on Political Advertisements. The amount spent in California for political advertisements varies depending on whether it is an even-numbered year (when statewide elections are scheduled) or not and on which political campaigns attract significant interest from campaign donors. Various groups also spend money on political advertisements to influence decisions of local entities, the state government, or the federal government. In an
even-numbered year, for instance, many millions of dollars are spent on advertisements to influence elections and governmental decisions.

Public Educational Entities. The state spends tens of billions of dollars per year to fund part of the operations of hundreds of public educational entities in California. These entities include early childhood education providers, K-12 school districts, community colleges, and two public university systems (the California State University and the University of California).

Proposal

1,000 Percent Sales Tax on Political Ads. This measure states that a sales tax of 1,000 percent would be imposed on "political advertisements," which it says refers to "any political advertising delivered within the state of California," including, but not limited to, "all media spending by political parties, political action committees or candidates." The measure provides there "shall be no exemptions to this tax except as federally required or as passed by a California ballot initiative." The tax proceeds would solely benefit "California public education."

Fiscal Effect

Many Legal Uncertainties. This measure likely would be subject to substantial legal challenges, inasmuch as the proposed 1,000 percent tax, if fully implemented, would render some existing forms of political communication infeasible.

Fiscal Effect Highly Uncertain. The amount of tax money the proposed sales tax would generate for public education is highly uncertain. This is due to the unknown outcome of the court challenges described above and uncertainty about how any such tax, however applied, would affect the behavior of groups and individuals involved in politics.

 This measure would have the following fiscal effect:

• Unknown increase in state revenues to be provided to public educational entities, assuming that the measure is allowed to go into effect after voter approval and any court challenges.