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May, 2013

PLF targets “cap and trade” auction as a massive tax that snuffs out jobs and violates the law

If California’s “cap and trade” program “isn’t a tax on business, then [Gov. Jerry Brown’s] dog ate his copy of the state Constitution.” That’s how the Placerville Mountain Democrat put it, in an editorial applauding PLF’s suit against the new auction scheme to “cap” carbon emissions (which means, some would say, putting a lid on the economy itself!)

Four times a year, businesses that emit significant amounts of carbon dioxide (or so-called “greenhouse gases”) are required to bid for “carbon emission credits” to keep operating.

Collectively, some of California’s most productive employers will have to shovel billions of dollars into the state treasury. Either they pay up, or they’ll have to close their doors, send their workers home, and/or move out of state. No wonder the Mountain Democrat calls the auctions, “an economy killer.”

Even though it was hatched in Sacramento, this scheme should concern you wherever you live. America’s economy is an integrated whole, and “economy killing” policies in any one state — including California — can have ripple effects on the business sector nationwide, further retarding our national recovery. Moreover, unless it’s shut down now, this new assault on job creators could inspire copycat business-gouging strategies else­where: After all, it’s not just on the West Coast that government is known for greed!

PLF’s lawsuit: The cap and trade auction is a gigantic tax that’s unconstitutional under Proposition 13

California’s landmark Proposition 13, which voters added to the state Constitution in 1978, is well-known for limiting property taxes and rescuing people who were at risk of losing their homes because of skyrocketing levies. But Proposition 13 also requires that any new state taxes receive two-thirds support in both chambers of the Legislature. As PLF’s lawsuit points out, the cap and trade auction violates this basic requirement.

The cap and trade auction didn’t receive two-thirds support in either house. In fact, it didn’t receive the vote of a single legislator: It was concocted by unelected bureaucrats at “CARB,” the California Air Resources Board.

And make no mistake: It is a tax. Officials are calling it a “regulatory fee,” but watch what they do, not what they say. More and more, it’s looking like a cash cow for the political class. For instance, as the Mountain Democrat notes, the Jerry Brown Administration proposes to spend cap and trade funds on “high speed rail.” (!)

Never mind that the wildly expensive “bullet train” can be viewed as a boondoggle all on its own. What it can’t be considered is a carbon-reducing project. Even the state’s Legislative Analyst has acknowledged this fact. Fueling it with cap and trade money derails any argument that the auction isn’t a program of general taxation.

Also, the auction isn’t structured as a “regulatory fee.” It doesn’t link the costs that businesses must pay with the amount of their impact on the environment. Instead, they bid as much as they can afford, for credits that amount to government “permission slips” to keep their doors open.

CARB claims it devised the auction program to implement AB 32, the controversial 2006 legislation that would ratchet carbon output down to 1990 levels by 2020 (as if our struggling economy weren’t “capping” businesses’ emissions already). But nothing in AB 32 authorizes an auction process to raise billions of dollars in state revenue. And if AB 32 did call for an auction tax, then AB 32 itself would be unconstitutionalbecause it didn’t pass with two-thirds majorities!

THANKS TO OUR DONORS, PLF is suing CARB — and cap and trade — on behalf of employers, entrepreneurs, private individuals, and taxpayer-rights defenders

In challenging the cap and trade tax scheme/scam, PLF attorneys represent a broad spectrum of businesses, associations, and individuals harmed by this program, along with taxpayer defense advocates. All of them are committed to pulling the plug on this plan to grow the government by siphoning cash out of the economy.

Together, our plaintiffs represent tens of thousands of people. A sampling of our clients:

  • The Morning Star Packing Company, headquartered in Woodland, California. Morning Star’s three tomato processing facilities emit carbon dioxide, and in just the first two auctions, Morning Star had to buy 31,000 carbon allowances at a total cost of $379,860, a sum that could have been better used to increase production and hire more employees.
  • California Construction Trucking Association (CCTA), a nonprofit California trade association representing nearly 1,000 members (mostly sole proprietors of one-truck operations).
  • Loggers Association of Northern California (LANC), a California nonprofit trade association whose mission is to advocate for the logging industry in Northern California. LANC has 160 members, including many family businesses that have been involved in logging operations in California for generations.
  • The National Tax Limitation Committee (NTLC), headquartered in Roseville, California, one of the nation’s oldest and most strategically oriented pro-taxpayer/entrepreneur organizations.

Filed in state Superior Court in Sacramento, the case is Morning Star Packing Company, et. al. v. California Air Resources Board

YOU CAN BE PART OF THIS HISTORIC EFFORT, WITH A GENEROUS DONATION to assist in PLF’s cap and trade litigation along with all of our pro-freedom work! This latest litigation is part of PLF’s long tradition of defending constitutional safeguards for taxpayers, from coast to coast — a tradition made possible by our liberty-loving supporters.

Thank you for helping PLF “rescue liberty” from bureaucrats who could “cap” freedom and “trade” away our jobsand our rights!

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Rob Rivett
Pacific Legal Foundation

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