HJTA Questions Legality of New $143 Billion AB 32 Tax

Jon Coupal
President of the Howard Jarvis Taxpayers Association

Last week the Howard Jarvis Taxpayers Association sent the AB 32 Economic and Allocation Advisory Committee (EAAC) a letter spelling out the reasons why we believe that the state has no legal authority to impose a new AB 32 auction tax on California companies and consumers. The California Air Resources Board (CARB) and the Governor have asked the EAAC to provide advice to CARB on how to spend up to $143 billion in new government revenue. We thought it would be wise for the EAAC to consider whether CARB actually has the authority to raise this revenue in the first place.

The idea of an auction tax has long been promoted by environmental organizations and is being considered by CARB as a way to impose a California-only cap-and trade system that would ration conventional energy use as a way to reduce greenhouse gas emissions under AB 32, our state’s Global Warming Solutions Act.

Beyond the fact that imposing a new $143 billion or more tax on California’s already struggling companies would destroy thousands of jobs and force more employers to leave the state, CARB has no legal authority to initiate a cap and trade auction, as the Legislature did not grant any such authority under AB 32. Should lawmakers attempt to bestow this taxing power on CARB retroactively, it will require a two-thirds vote of both houses because imposing government costs through a cap and trade auction is clearly a tax.

While actual costs are unknown at this point, a draft report by CARB’s Economic Advisory Committee has developed some estimates that indicate auctioning 100% of the allocations in a cap and trade program could cost up to $143 billion between 2012 and 2020. These costs would be imposed directly on the several hundred manufacturing companies that process food, materials and energy in California but, of course, would ultimately be borne by consumers.

How these tens of billions in new taxes would be spent has not yet been decided, but it would clearly be a $143 billion windfall to the same politicians who have made such a mess of the budget and the state’s economy.

And it doesn’t stop there. This $143 billion AB 32 auction tax is over and above the billions in additional costs from other AB 32 measures. For example, public utilities estimate that electric bills would go up 30% per month. Other studies show gasoline and diesel costs would increase $3.7 billion a year and new homes would cost $50,000 more.

And what would we get for all this money? A very expensive message to other states and nations not nearly as anxious to sacrifice their economies on the altar of environmental correctness. According to the Governor’s own special assistant, AB 32 and California alone will have at best symbolic benefits but no measurable impact on global warming.

CARB’s auction tax is simply one more attempt at separating taxpayers from their money without the legally-required voter approvals. CARB should run, not walk, away from this one.

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