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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

Website: http://www.cleanenergyjobsact.com/

  • 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.


This Study’s Materials

Adrian Moore

Adrian Moore, Ph.D., is vice president of policy at Reason Foundation, a non-profit think tank advancing free minds and free markets. Moore leads Reason's policy implementation efforts and conducts his own research on topics such as privatization, government and regulatory reform, air quality, transportation and urban growth, prisons and utilities.

Moore, who has testified before Congress on several occasions, regularly advises federal, state and local officials on ways to streamline government and reduce costs.

In 2008 and 2009, Moore served on Congress' National Surface Transportation Infrastructure Financing Commission. The commission offered "specific recommendations for increasing investment in transportation infrastructure while at the same time moving the Federal Government away from reliance on motor fuel taxes toward more direct fees charged to transportation infrastructure users." Since 2009 he has served on California's Public Infrastructure Advisory Commission.

Mr. Moore is co-author of the book Mobility First: A New Vision for Transportation in a Globally Competitive 21st Century (Rowman & Littlefield, 2008). Texas Gov. Rick Perry said, "Speaking from our experiences in Texas, Sam Staley and Adrian Moore get it right in Mobility First." World Bank urban planner Alain Bartaud called it "a must read for urban managers of large cities in the United States and around the world."

Moore is also co-author of Curb Rights: A Foundation for Free Enterprise in Urban Transit, published in 1997 by the Brookings Institution Press, as well as dozens of policy studies. His work has been published in the Wall Street Journal, Los Angeles Times, Boston Globe, Houston Chronicle, Atlanta Journal-Constitution, Orange County Register, as well as in, Public Policy and Management, Transportation Research Part A, Urban Affairs Review, Economic Affairs, and numerous other publications.

In 2002, Moore was awarded a World Outsourcing Achievement Award by PricewaterhouseCoopers and Michael F. Corbett & Associates Ltd. for his work showing governments how to use public-private partnerships and the private sector to save taxpayer money and improve the efficiency of their agencies.

Prior to joining Reason, Moore served 10 years in the Army on active duty and reserves. As an noncommissioned officer he was accepted to Officers Candidate School and commissioned as an Infantry officer. He served in posts in the United States and Germany and left the military as a Captain after commanding a Heavy Material Supply company.

Mr. Moore earned a Ph.D. in Economics from the University of California, Irvine. He holds a Master's in Economics from the University of California, Irvine and a Master's in History from California State University, Chico.