California Voters’ Guide 2012: Proposition 39
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Policy Brief

California Voters’ Guide 2012: Proposition 39

Among a daunting package of ballot questions, here is the free minds and free markets perspective on proposition 39.

Proposition 39: Tax Increase on Multistate Businesses and Funding Clean Energy

Proposition 39 would require multistate businesses to pay more taxes in California by removing a provision that currently allows them to pay more in lower tax states instead. Some of the revenue from the higher taxes will go green energy programs.

Fiscal Impact: The Legislative Analyst’s Office estimates that Prop. 39 will raise approximately $1 billion in additional annual state revenues that will grow over time. About half the revenue would go to fund energy efficiency and alternative energy projects.

Arguments for Proposition 39

Supporters say that in 2009 a late night budget deal created a tax loophole that gives an unfair advantage to out-of-state corporations that create few jobs in California, and that this loophole now costs the state budget $1 billion per year. They say the loophole also costs the state tens of thousands of jobs, because it actually rewards companies for having fewer jobs in California. Prop. 39 simply closes this loophole, they say, and dedicates a portion of the revenues from closing the loophole to energy efficiency programs that will create jobs and reduce public energy costs for years to come.

Closing the tax loophole, supporters argue, will create long term revenue to help reduce the deficit and increase available funding for vital services such as education, health and social services, transportation, and prisons. And they say that funding clean energy projects will create 20,000 to 30,000 construction-related jobs on projects like energy efficiency improvements for public schools and public buildings; installing solar panels; repairing, insulating, or weatherizing old buildings; replacing windows with more energy efficient models; and installing technologies that require less energy.

Supporters of Proposition 39


  • Thomas Steyer, hedge fund manager
  • Many construction unions
  • A number of environmental groups
  • California Teachers Association

Largest Donors to the Yes Campaign as of October 1, 2012

  • Thomas Steyer: $21,900,000
  • Californians for Clean Energy and Jobs: $350,000
  • League of Conservation Voters: $25,000

Arguments Against Proposition 39

Opponents say Prop. 39 is a massive $1 billion tax increase on California job creators that will result in the loss of thousands of middle class jobs. They argue that California’s unemployment rate is already the third worst in the country and that Prop. 39 makes our problems worse.

Prop. 39 is a recipe for waste and corruption, opponents say, spending $2.5 billion that could go to schools, health and welfare, environmental protection or public safety on a new government commission with fat salaries and little accountability for how they spend it on corporate contracts to deliver so-called ‘Green Energy’ programs. With a state budget deficit of nearly $16 billion, they say, Prop. 39 makes things worse by raising taxes to fund more boondoggles.

Opponents of Proposition 39

Website: there is not an official No campaign

  • California Manufacturers & Technology Association
  • National Tax Limitation Committee
  • Friends for Saving California Jobs

Largest Donors to No Campaign

  • None

Discussion of Proposition 39

Prop. 39 is a large tax increase on businesses. In a weak economic recovery, taxing businesses is no way to create jobs.

Proponents would have you believe that taxing businesses so government can give grants creates massive numbers of jobs. If that were true, getting out of the recession would be a snap. In fact such taxes are at best a shell game, moving money from one company to another, with no gain to the overall economy. But it is unlikely to be at best; more likely the tax would take money from companies that are productive, and grow and create jobs, and give that money in grants to companies that can’t make a profit, can’t grow, and rely on government grants to survive. Did we learn nothing from Solyndra and all of its brethren green energy firms that milked government loans and grants to survive?

Tax reform in California should involve moving to a simpler, more neutral and flatter tax code. Having political fights every year about what does and does not get taxed and at what level is a recipe for political manipulation and gives special interests too much incentive to lobby for tax breaks for themselves and tax hits on their competition.


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