Assembly:
Cap-and-Trade Spending Bill Advances to Senate

Legislation giving the Legislature authority over spending cap-and-trade (AB 32) revenue and establishing very broad criteria on how the funds can be spent (AB 1532, John Pérez) was approved by the Assembly May 29 by a 49-27 vote.

Assembly Speaker John Pérez said the public voted to support AB 32 in the 2010 election (by rejecting Proposition 23, which would have suspended the legislation's provisions until the state's unemployment rate drops to 5.5 percent or lower for four consecutive quarters), so the issue now is how to establish a framework for spending the additional funds. He said the provisions do not constitute a tax increase – a position that likely will be litigated.

Several speakers said AB 32 implementation will destroy California's business climate. Assemblywoman Shannon Grove said many employees will lose jobs under the cap-and-trade program, and added that California Air Resources Board Chair Mary Nichols refuses to listen to business owners at hearings. Assemblyman Tim Donnelly said cap-and-trade is a tax on business. Assemblyman Bill Berryhill pointed out that Foster Farms will pay an additional $8 million a year to operate in California under the cap-and-trade program, and added that the company won't be able to compete with Tyson, which is located in Arkansas, which doesn't have the additional costs (and had a lower overall cost of doing business even before the California-only environmental costs were approved).

In other Assembly action:

Study on a Sales Tax on Services Approved. AB 1963 (Huber), directing the Legislative Analyst's Office to conduct a study the sales tax structure with respect to taxing services, was approved May 31. CalTax requested that the author amend the bill to assess whether the state should apply a form of tax credit or tax exemption on business inputs, and to utilize dynamic revenue modeling in determining its conclusions. With these amendments, the bill was approved by a vote of 56-18, and now heads to the Senate.

Bill Requiring Disclosure of Confidential Tax Information Is Approved. AB 2439 (Eng), requiring the Franchise Tax Board to give the state controller confidential information on corporate taxes to post on the controller's website, was approved May 31 by a vote of 47-24. The bill is supported by the California Labor Federation and the Service Employees International Union. California Tax Reform Association lobbyist Lenny Goldberg has said that the bill is needed because companies "manipulate the tax system." CalTax opposes the bill because it represents a major infringement on taxpayers' rights to confidentiality, and is intended to generate more fodder for political and policy attacks on businesses.

Energy Infrastructure Financing Districts Approved. AB 2551 (Hueso), authorizing local governments to establish infrastructure financing districts in a "renewable energy zone," as defined, and exempting the district from voter-approval requirements, was approved May 31 on a party-line vote of 46-26. The author said his bill was put together by industry, and that there are a number of impediments for industry getting started on renewable projects. Assemblyman Tim Donnelly said he opposes the bill because it eliminates the two-thirds vote requirement needed to form such districts.

"Tax Expenditure" Reporting Measure Moves to Senate. AB 2638 (Eng), requiring the state's annual "tax expenditure" report to include extraneous data on "expenditures" of $5 million or more (based on a static model) from the sales and use tax, personal income tax and corporate income tax, was approved by the Assembly on May 29 with a 50-27 vote.

June 1, 2012
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