California Construction Trucking Association (CCTA)

In 2020 families will pay annual hidden tax of $2,500, state and local annual lost revenues to hit $7.4 billion

Sacramento - California families will be forced to pay $2,500 annually and lose $900 in earnings per year by 2020 as a result of the California Global Warming Solutions Act (AB 32), according to a study released by the California Manufacturers and Technology Association (CMTA).

The costs to families will start to mount immediately in 2013, the study says. Losses to employers and the state’s economy will be counted in the billions.
“These policies will create a large but hidden tax on families and will add new burdens to a fragile state economy” said Jack Stewart, CMTA president. “This new tax is not what we need while Californians struggle to find jobs, meet mortgage payments and maintain a reasonable quality of life.”

AB 32 spawned a complex regulatory scheme to reduce greenhouse gas emissions to 1990 levels by 2020. AB 32 was passed in 2006 to establish a statewide cap on emissions judged to be responsible for “climate change.”
The study of the fiscal impacts of the regulatory program was conducted by Andrew Chang and Company and was commissioned by CMTA.

The study also shows that by 2020, California will have 262,000 fewer jobs, 5.6 percent less gross state product and $7.4 billion less in annual local and state tax revenues. These figures were reached based on an “optimistic” scenario, where costs for each policy are assumed to be at the low end of a range of expected costs and the environmental goals are achieved. It assumes plentiful low carbon fuel with limited demand outside of California, 2.5 percent annual energy efficiency improvements and a significant reduction in vehicle miles traveled.

When more realistic projections are used, the costs are staggering. In the study’s “high case” scenario, families pay $4,500 in annual costs and California receives $38.8 billion less in local and state tax revenues by 2020.
Even in the rosiest of scenarios, the “low case”, families still pay $1,300 in annual costs and California loses $15.8 billion in local and state tax revenues.

These impacts are particularly worrisome when considered in light of other recent trends. Although California had hoped to be at the forefront of a national movement when it passed AB 32 in 2006, it remains the only state with a cap on emissions and no federal program is on the horizon.

“This poses great risks to manufacturers and other firms competing in regional and global markets,” Stewart said. “Current data shows that California already is lagging the nation in new manufacturing investment because of other cost pressures and uncertainties. The Legislature must use this critical data to get control of AB 32 costs.”

For small businesses, the threat may be even greater.

“For the past five years, small business owners have been concerned about their ability to operate under the potential costs of a complicated AB 32 regulatory scheme,” said John Kabateck, executive director of the National Federation of Independent Business/California. “This comprehensive report tells us that small business will get hit from all sides. Consumers will have less money to buy our products, employers will be forced to purchase more affordable products outside of California, and our own energy costs will make it nearly impossible to stay in business.”

The report also details case studies on the cost impacts on local government by using publicly available data.  Under the “optimistic” scenario, California’s local governments will lose $1.9 billion in revenues by 2020 and face an additional annual cost increase of $2.3 billion in 2020.

“Municipalities are struggling everywhere in California,” said Diamond Bar Mayor Ling Ling Chang. “This is a double hit in both lost revenues and substantial new costs. I’m in favor of greenhouse gas reductions but there must be a cheaper way to do this.”
Our schools will be forced to adjust too. Under the “optimistic scenario”, the Los Angeles Unified School District will face cumulative costs of $27.3 million with an annual impact of $5.5 million in 2020.

This study, titled Fiscal and Economic Impact of the California Global Warming Solutions Act of 2006, uses data from publicly available sources in a comprehensive appendix. The report and other information are available at
www.cmta.net.