Cap-And-Trade Tax Would Create Higher Prices for All of Us

Bill LaMarr
Executive Director of the California Small Business Alliance

They won’t come with a neat little receipt for the cost of the much criticized high-speed rail project. They won’t even come with an honest explanation that a new tax is the reason.

But make no mistake, increased prices are coming, if the California Air Resources Board succeeds in imposing a new billion dollar tax on California industries, universities and others.   The tax will be hidden as part of the state’s AB 32 global warming program and will be assessed without the two-thirds vote of the legislature required by the state constitution.

And now Governor Brown wants to get into the act by diverting this questionable tax to the General Fund to pay for projects like high speed rail. Regardless of who ultimately spends the money, if the tax goes forward  it most certainly will present greater challenges for small businesses and consumers.

AB 32 already promises to be the most expensive regulatory program by any state ever. It also comes with its own controversy as it attempts to limit greenhouse gases by implementing a cap-and-trade system which involves, among other things, issuing “emissions credits”  to businesses that have reduced greenhouse gases to below their industry limit.  Those businesses can then trade their extra emissions credits to companies that are above their limit, keeping total statewide emissions under the cap.

The new tax comes in because of CARB’s intention to withhold some credits and force businesses who need them to purchase them back, collecting a billion dollars from companies trying to survive the state’s sluggish economy.

For businesses, survival means covering your costs in a time of sagging sales and the second highest unemployment rate in the country. That means a billion dollars worth of pressure to increase the costs of goods that affected companies sell on Main Street to Joe and Jane Average Californian who are just trying to makes ends meet.

The part of the billion dollar tax that can’t be covered by higher prices will force more layoffs and cutbacks.

Some say not to worry because it is likely the tax will be thrown out by a court challenge because it hasn’t received the necessary two-thirds vote required of the legislature. But why wait for a court to fix an unnecessary problem?

Some will try another diversion. They will argue the tax is really a fee and only needs a majority vote from the legislature. This premise was severely undermined when Governor Brown discarded all pretense that the cap-and-trade levy was a fee when he announced the money would be used to pay for the spectacularly over-budget high-speed rail project.

A fee must be spent on a program directly affecting those paying it.  It seems abundantly clear that high-speed rail has no connection to running the cap-and-trade system.

Without the required two-thirds approval, the cap-and-trade tax would likely be tossed by the courts, making it the latest in a string of failed budget gimmicks and the cherry on top for the strong chorus of critics who say high-speed rail’s financing scheme is largely wishful thinking.

If the tax stands, then small businesses – California’s job creators – will be forced to spend more money on higher costs and less money on new employees and business expansion.

There is no reason the state needs to stick its hands in the cap-and-trade till. So, this new scheme is not only harmful, it’s unnecessary.

Please help by telling Governor Brown to rein in CARB’s effort to impose an unconstitutional tax on businesses, and look elsewhere for funding for his own pet projects. . Tell him that dropping the billion dollar tax will permit businesses to spend money on growth and new hiring. That in turn will help strengthen the weak economy and fill the state’s coffers with revenue that is gimmick-free and legally sound.

That kind of plan would deserve clap-and-praise.

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