California’s cap and trade tax at the Court of Appeal

We filed our opening brief in Morning Star Packing Company v. California Air Resources Board, our challenge to the billions upon billions of dollars in cap and trade taxes being imposed on Californians. The bottom line is that while the legislature may have called for the use of market-based mechanisms to reduce greenhouse gasses, it did not intend for its law to become a defacto tax, taking many billions of dollars out of the pockets of Californians. But that’s exactly what the Board did — it has adopted an auction system that is raising billions for general revenues. The trouble is, this tax was adopted after Proposition 13 was enacted. And since “A.B. 32” passed with only a simple majority, and since it is for all practical purposes a massive tax measure, it violates Prop. 13.

In response to the State’s arguments that the auction proceeds are just “fees” and not taxes, our brief points out that the California Supreme Court set out specific criteria for determining whether a levy is a fee or a tax: and that these criteria are simply not met here.  The moneys raised are proportionate to neither to the benefits received by the taxed entitles nor the burdens imposed.  Moreover, these moneys are being used for all manner of things well beyond the costs to run the program — everything from general fund borrowing to low-income neighborhood assistance.

Lastly, more recent statutory amendments to A.B. 32 don’t help either.  Even if these enactments converted some of the moneys from taxes into fees, they were adopted well after the voters amended Prop 13 with Prop 26 — the initiative that requires fees to be voted on by two-thirds of the legislature.

For a bit more see our video.