A major lawsuit using Proposition 26’s provisions to protect taxpayers from hidden taxes was filed in Los Angeles Superior Court Monday against the L.A. County ordinance banning the use of plastic carryout shopping bags. The lawsuit will be filed by Neilsen, Merksamer, Parrinello, Gross & Leoni on behalf of plastics manufacturer Hilex-Poly and individuals who have purchased the bags.

The ordinance prohibits providing customers plastic carryout bags in the unincorporated areas of the county. Under the ordinance, stores that provide recyclable paper carryout bags to customers charge 10-cents for each bag provided by the store. The suit charges that the 10-cent charge for using paper bags is a violation of Proposition 26, which requires that a fee cover only the cost of a service. “The county is requiring a 10-cent charge for a bag that stores used to give away for free,” said attorney Steve Merksamer who represents Hilex-Poly.

Proposition 26 passed by voters in the November 2010 election was intended to stop hidden taxes by setting standards to prevent taxes from being disguised as fees.

Merksamer said the county thinks it insulated itself from the Prop 26 provisions because the retail stores collect the fee rather than a government entity. However, he says the ordinance requires the retailer to keep the money and do with it what the government tells it to do.

Monies retained by the store can only be used for: 
a) Costs associated with complying with the ordinance 
b) Actual costs of providing recyclable paper bags 
c) Educational materials or campaigns for reusable bags.

In addition, stores must report to the County on a quarterly basis the total number of recyclable paper bags provided and monies collected, as well as efforts undertaken to promote reuse and recycling.

In effect, the retailer is acting as a surrogate for the government. The County is using the retailers to promote its recycling program.

There is a precedent setting nature to this lawsuit. At issue: Can businesses be required to collect monies and spend them on programs advocated by the government that requires the charge? Is that not another way to tax?

If the measure is indeed a tax for a specific purpose, it would require a two-thirds vote of the people under the law.

Plaintiffs hope for a relatively quick hearing from the court.