California Voters Raise Corporate Taxes, Give Proceeds to ‘Green’ Projects

Published January 2, 2013

California voters approved Proposition 39, which raises taxes on multistate businesses and directs half the revenues to go to so-called green energy projects.

$1.1 Billion Tax Hike

Proposition 39, which supporters dubbed the Clean Energy Job Creation Fund, targets multistate businesses by eliminating one of the formulas by which they may calculate their taxes. The California Legislative Analyst’s Office estimates the change will result in an extra $1.1 billion per year in taxes. 

“Proposition 39 was a tax increase, pure and simple. The Clean Energy Job Creation Fund created by Proposition 39 will not create real jobs, but only jobs dependent on subsidies from the state,” said Daniel Simmons, director of regulatory and state affairs at the Institute for Energy Research. 

Proposition 39 eliminates one of two methods used by corporations with assets in multiple states to calculate their in-state income for purposes of determining their tax liability. As a result, corporations will only be able to use the single sales factor approach when calculating their tax bill. 

Single-Interest Beneficiary

For the first five years under the new system, half of the new tax revenues will go to California’s Clean Energy Job Creation Fund. The other half will go to the state’s general fund. After five years have passed, all the new tax revenue will go to the general fund. 

Proposition 39 supporters claimed raising taxes and directing the revenues to energy retrofits and renewable energy projects will generate wealth and benefit the state’s economic well-being. 

Many energy analysts, however, disagreed.

“If it makes actual economic sense to retrofit buildings, as provided for in the Clean Energy Job Creation Fund, those activities will happen without the subsidies,” Simmons said. 

More Jobs Lost Than Created

Simmons said raising taxes will kill a more jobs throughout the economy than the small number the new tax scheme will create within the inefficient ‘green’ industry sector. 

“The money to create the fund will come from companies who will now have to cut back on production and job creation because they are forced to pay California more tax dollars,” said Simmons. 

“There is no way the state of California will be spending this money to create as many jobs as private companies would have, responding to actual consumer desires,” said Simmons. “The simple reason is companies need to respond to actual consumer needs in order to make money and stay in business. By contrast, the new government fund does not have to meet consumer demands and funds certain projects regardless of whether they make any economic sense whatsoever.”

“Money that is given to ‘green energy’ projects merely robs resources from productive economic sectors and hands it over to an inefficient industry,” said Jay Lehr, science director for the Heartland Institute, which publishes Environment & Climate News. “This never helps the economy and ultimately kills jobs.”

Alyssa Carducci ([email protected]) writes from Tampa, Florida.