Cue the candles and cake: One of the great documents of liberty hits the big Eight-0-0 this year.
Eight centuries ago, at Runnymede, England’s barons forced a resentful King John to accept landmark limits on royal power.
Magna Carta – the “Great Charter” – set precedents that undergird our freedoms to this day: protections for property rights; guarantees of trial by jury; and safeguards against taxation without representation.
June 15 is the official anniversary. Commemorations are scheduled all year, worldwide.
One of the most meaningful 800th birthday bashes could happen in California – if the state judiciary (specifically, the Third District Court of Appeal) is up to it.
The justices should toast Magna Carta, and its stand against oppressive taxation, by consigning our cap and trade “auction” system – a massive, illegally concocted revenue machine – to the dustbin of history.
Under the California cap and trade program, businesses that emit significant carbon dioxide must bid, in quarterly auctions, for “carbon credits” that give them the “privilege” of keeping their doors open.
By 2020, these auctions could vacuum as much as $75 billion into government coffers – inflating still more the cost of goods, services and job-creation in this notoriously overregulated state.
We just learned that the conscripted companies surrendered a staggering $1 billion in this year’s first bidding exercise. That’s the state’s largest haul since the auctions launched in 2012.
And now, we’re all paying into the program at the pump, after the regulation was expanded to transportation fuels at the beginning of this year. Even more than before, it’s costlier to fill up in California than the rest of the nation.
2/3 vote for new taxes – a law we can live with
Two lawsuits against the auction program are before the Third District right now. One is from the California Chamber of Commerce, the other from Pacific Legal Foundation on behalf of a coalition of businesses, taxpayer associations, and individuals.
Both suits highlight how taxpayer protections have been violated. The auction scheme was foisted on us without sufficient legislative support. Instead of winning 2/3 majorities in the Senate and Assembly, as the state Constitution mandates for new taxes, it was devised by unelected regulators at the California Air Resources Board.
Even if you buy CARB’s claim that the auction plan complies with AB 32 (the 2006 legislation ordering dramatic cuts in carbon outputs), AB 32 didn’t pass by supermajorities – so the auction tax is still void for lack of votes.
It was Proposition 13 that gave us the 2/3-vote rule for new taxes. Its author, Howard Jarvis, may not have had Magna Carta in mind, but he was treading the path of those long-ago foes of arbitrary rule. They famously insisted that the monarch’s demands for more money had to be run by the baronial council. And that body’s approval required more than a simple majority vote. We’re told that each baron had to agree, individually, to any payment he made.
In California, legislative consent for new taxes was part of the system from the start. Prop. 13’s innovation, through its supermajority rule, was to re-define “consent” to mean “consensus.” With state taxes already painfully heavy, Jarvis saw that it was only fair and sensible to require broad agreement, from stakeholders across the spectrum, before we’re taxed even more.
Unfortunately, Sacramento Superior Court Judge Timothy Frawley missed Prop. 13’s relevance to cap and trade when he ruled on the matter last year. Rejecting the challenges by PLF and the Chamber, he labeled the auction not a “tax,” but “more like a traditional regulatory fee” exempt from the supermajority rule.
He did say it was a “close question.”
But actually, it isn’t.
This torrent of revenue is clearly a tax.
The auction lacks the core features of a regulatory fee as defined by case law. There is no nexus, or measurable link, between what a business pays the state and the carbon it produces. Instead, bidding levels are the fluctuating and unpredictable result of competitive forces (how many businesses take part in an auction), and bookkeeping factors (how much money each business can afford to part with).
Salivating over a slush fund
As the dollars flood in, there is drooling at the Capitol, where the proceeds are ogled as a slush fund. High Speed Rail tops the recipient list; it is promised a quarter of the take – even though train construction will dirty the air (the Legislative Analyst estimated the project “would actually generate [greenhouse gas] emissions of 30,000 metric tons over the next several years”).
Memo to state officials: Don’t bet your milk money that this extraordinary public-sector payday, with its towering costs to the economy, will last. Imposed without the necessary levels of consent, the cap and trade auction collides with the letter of the California Constitution – and the spirit and legacy of Magna Carta.
Here’s hoping the Third District will issue a ruling to that effect during this auspicious 800th anniversary year.
Then, we can all grab our noisemakers and party like it’s 1215.