The battle between business and labor is headed for a high-stakes showdown at the California Supreme Court this week over a ballot measure that would tip the balance of power at the state Capitol.

The court on Wednesday will hear oral arguments on the legality of an initiative backed by business interests that strips the state Legislature and the governor of the ability to increase taxes and requires statewide voter approval.

In an effort to quash the measure, Gov. Gavin Newsom and legislative Democrats petitioned the Supreme Court last September to intervene. They argued that change revises the California Constitution and, therefore, can only be placed on the ballot if ratified during a Constitutional Convention or by winning a two-thirds vote in the Legislature.

The proposal has alarmed Democrats, unions and their liberal allies. The measure could limit state and local funding, hamstring the ability to generate new money for programs and make it more challenging for the governor and Legislature to offset a budget deficit in an economic crisis without slashing progressive policy priorities.

"They should be afraid because the people of California are fed up," said Rob Lapsley, president of the California Business Roundtable, a proponent of the measure. "This gives the people of California the right to vote on future taxes, and voters are going to support it if it's on the ballot."

If approved by voters, the proposal would mark a historic win for the business community. Lapsley said establishing new checks and balances on taxation is essential to creating jobs and attracting companies to California.

Labor unions representing state workers, teachers, police and firefighters have joined forces with Democrats and dozens of other organizations to ask the high court to strike down the measure. They argue it would impair essential government functions and threaten services that rely on state dollars.

"I want to make it clear that the 'Taxpayer Deception Act' lets wealthy corporations, who can afford expensive campaigns, to block taxes on their industry while regular Californians, regular people, shoulder more of the cost of critical services," said Tia Orr, executive director of Service Employees International Union California, which is leading the charge to defeat the measure on the ballot.

Officially dubbed the "Taxpayer Protection and Government Accountability Initiative," the measure pushed by Lapsley's group and the Howard Jarvis Taxpayers Assn. asks voters to require local governments to vote on all fee increases, which can now be approved administratively. The threshold to increase local special taxes would increase from a majority to a two-thirds vote of the people.

Fee increases at the state level, which are often approved by state agencies and boards, would need support from a majority of the state Legislature. The measure would expand the requirements necessary for a statewide tax increase, which currently can be done with a two-thirds vote of the Legislature. Under the ballot measure, support from a majority of California voters also would be required.

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