NCPA - National Center for Policy Analysis


January 12, 2010

Could Californians finally be serious about turning around their sputtering economy?   One hopeful sign is a ballot initiative that would repeal the Golden State's version of a cap-and-trade carbon tax, says the U.S. Chamber of Commerce.

  • The law to reduce the state's carbon footprint was enacted with great hoopla by the Democratic legislature and Republican Governor Arnold Schwarzenegger in 2006 when the state's economy was growing and the jobless rate was 5 percent.
  • The law requires that starting in 2012 the state must ratchet down its carbon emissions to 1990 levels by 2020.
  • The politicians and green lobbies told voters this energy tax would create jobs—the same fairy tale many in Washington are repeating today.
  • Now the jobless rate is 12.3 percent, 2.25 million Californians are unemployed, and the state government is broke.

No matter what one thinks of climate science, it makes little sense for an individual state to unilaterally impose major new tax and regulatory costs on its own industries. The impact of California's gesture on global temperatures will be infinitesimal, but the economic impact will make the state even less attractive to start or expand a business says the Chamber:

  • A 2009 study by economists at the California State University at Sacramento commissioned by the California Small Business Roundtable found that the implementation costs "could easily exceed $100 billion" and that the program would raise the cost of living by $3,857 per household each year by 2020.
  • A new study commissioned by the Governor's Office of Small Business Advocacy estimates that the direct cost of current California regulation is $175 billion or nearly twice the size of the state general fund budget and about $134,000 per small business each year.

The Golden State already has the second most business-unfriendly regulatory climate in the nation, after New Jersey and before the cap-and-trade law, says the Chamber.

Source: Brad Peck, "From the States - Emissions and the EPA," U.S. Chamber of Commerce, January 11, 2010.

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