Don’t look now, the Legislature is increasing your taxes

Loren Kaye
President of the California Foundation for Commerce and Education

Just because state taxes weren’t extended by the
Legislature (or the voters) to close the state budget gap doesn’t mean the
Legislature is not planning to raise your taxes.

And when I write "Legislature," I’m including

Even as negotiations to temporarily extend sales,
income and vehicle taxes came a cropper, both the Assembly and Senate approved
legislation – by supermajority votes – moving tax increase proposals to the
opposite house.

These tax increases would not support trivial
programs like colleges and universities, trial courts or state parks. They go
to a core function of state government: subsidizing renewable energy and energy
efficiency programs and research.

I’m not kidding: while public four-year institutions
are suffering $1.3 billion in cuts, or more, from existing funding levels, a
bipartisan legislative consensus is moving a total of $3.1 billion in new tax
subsidies for energy investments not supported by private markets:

  • AB 723 by Assemblyman Steven Bradford
    would extend the ratepayer subsidy for renewable and energy efficiency projects
    and energy research for eight years, hitting ratepayers annually for $334
    million in higher electricity bills. Assemblyman Das Williams has a similar
    bill, AB 1303.
  • AB 1150 by Assemblyman V. Manuel Pérez
    would extend the ratepayer subsidy for self-generated electricity by one year.
  • SB 585 by Senator Christine Kehoe would
    add $200 million to the total tax subsidy for solar programs

These subsidies are not paid out of utility profits,
nor are they merely down payments on programs with a guaranteed return on
investment. They are uneconomic, which is why the Legislature had to mandate
them and require a rate increase to support them. In any other context, a
mandatory levy for a general public policy purpose that does not directly
benefit the payer is commonly known as a "tax."

Most of these bills recognize their status as tax
increases, so require and have achieved a two-thirds vote. The exception is AB
1150 by Assm. Pérez, which has been tagged incorrectly as needing only a
majority vote, potentially running afoul of Proposition 26, approved by voters last November.

The timing of these measures adding new economic
burdens on homeowners and businesses for low-priority, no-return programs seems
terribly inappropriate given our stalled recovery from the recession. And the
Legislative Analyst has already slammed one object of the subsidy
(the research program) targeted by AB 723.

But the most depressing conclusion from this is the
apparently higher priority, for raising taxes, that the Legislature assigns to
subsidies for energy projects over higher education, public safety, or parks.

Loren on Twitter: @KayeLoren

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