Gann Files Brief With High Court Against Prop. 103

Tax-cut advocate Paul Gann has entered the legal battle over Proposition 103 by filing a brief with the state Supreme Court siding with the insurance industry on their contention that the initiative contains an unconstitutional prescription for levying premium taxes on the industry.

According to Proposition 103, the state Board of Equalization is allowed to set a new, higher rate for premium taxes to compensate for an estimated $125 million revenue shortfall that would be caused by rolling back insurance rates for a year as called for in the initiative. The rollback provisions, however, have been stayed by the high court pending a constitutional review of the measure.

Gann is now joining the insurers in arguing that this premium tax provision violates a section of Proposition 13 that states, “Any changes in state taxes enacted for the purpose of increasing revenues collected . . . must be imposed by an act passed by not less than two-thirds” of the Legislature.

Lawyers defending Proposition 103 in the Supreme Court case have pointed out, however, that the contested tax provision does not call for any net increase in state revenues, but is simply directed at replenishing revenues that may be lost.

The Gann “friend-of-the-court” brief was filed on his behalf by Long Beach attorney Allan E. Tebbetts and is the latest in what is expected to be a long series of briefs filed in the case by various interested parties. Gann was a principal associate of Howard Jarvis in sponsoring Proposition 13 in 1978.

In another two such briefs, for instance, the Assn. of Defense Counsel of Northern California and the Southern California Assn. of Defense Counsel have joined the insurers in arguing for the court striking down Proposition 103.

“Proposition 103 will work a hardship on every citizen in the state of California,” said Archie Robinson, statewide president of the two groups. “Its effect will be to reduce the availability of insurance to every driver, to every homeowner, to every business owner, to every professional person.”

Harvey Rosenfield, chairman of the 103 campaign, responded to the latest briefs, saying:

“The insurance industry has spent tens of millions of dollars through law firms and businesses and insurance agents fighting us, and many of these firms and organizations have an interest in maintaining the status quo because it enriches them at the expense of the public. It’s not surprising that all these insurance industry allies want to thwart the will of the people.”

Meanwhile, in another development, a spokeswoman for state Insurance Commissioner Roxani Gillespie said she will not call a public hearing on her challenge of State Farm’s practice of selling to new auto insurance customers at higher rates than old ones until next month.

Gillespie first challenged the practice Nov. 29. Ten days later, State Farm refused to change its practice and asked for a public hearing. The spokeswoman said the insurance commissioner is on a two-week vacation.