If you were the leaders of the State of California and you were hemorrhaging businesses, with entire industries leaving as fast as they could pack and taking jobs with them, what would you do? Assist with job training? Offer tax credits? Ease regulations?

Wrong. The State of California didn't do that. Instead, they looked at the few still struggling industrial businesses dumb enough to want to still operate in this hostile environment and asked why? Why are they still here and just how quickly can we put them out of business? So California passed a new billion-dollar tax aimed at exactly those few manufacturing businesses. A new tax that, like a neutron bomb that only kills people while leaving buildings untouched, kills only industrial businesses and leaves high tech and retail alone.

Welcome to the world of "Cap and Trade." 

You see, the State of California perceives any business with a smokestack as the enemy. California politicians don't see industry as something that must be cultivated or as the foundation of an economy. They don't appreciate the hundreds of thousands of jobs created by industrial employers. Just the opposite -- the state sees them as an environmental problem, a bug that must be isolated and crushed. The state wants to punish job creators in as many ways as those empty suits can conjure.

A nearly identical Cap and Trade (otherwise known as Cap and Tax) bill was unable to pass the U.S. Congress in 2009. The premise of Cap and Trade is to impose a cap on carbon dioxide emissions through a convoluted (and ultimately unworkable) system of emission permits. An arbitrary cap imposed by bureaucrats who have never produced anything except reams of paper pollution. Each company is allotted a number of tons of emissions per year. If they need more (and they always do) they can buy these emission credits from others that have either excess credits because they're producing less, most likely because they either went out of business or are about to do so. Or they can pay the state.

The heart of this scheme is outright extortion -- a multi-billion dollar tax on businesses. If you need more credits, the government will sell them to you. So this discourages economic growth and encourages decay. Who pays for these taxes? Not businesses, but you, the hapless consumer, through increased prices. The hardest hit are the utility and energy companies and you the energy consumer.

Money is the barometer of a society's virtue. When you see that trading is done, not by consent, but by produce nothing--when you see that money is flowing to those who deal, not in goods, but in favors--when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you--when you see corruption being rewarded and honesty becoming a self-sacrifice--you may know that your society is doomed.

Ayn Rand, Atlas Shrugged (1957)

Businesses in Revolt

A coalition of California companies and taxpayer groups is fighting back with a new lawsuit filed by the non-profit Pacific Legal Foundation challenging the constitutionality of the legislation (Morning Star Packing et al. v. California Air Resources Board).  They argue that Proposition 13, which the voters passed in 1978, prohibits new taxes except those passed by a 2/3rd vote of both houses of the legislature. This tax was not even passed in the state legislature. It was hatched in the minds of bureaucrats at the California Air Resources Board (CARB). Never heard of them? They're the ones who declare which days you can burn firewood in your fireplace and they have a huge team of roving police ready to issue stiff fines for violations. So some unelected bureaucrat now gets to impose billions of dollars of taxes on business and you the consumer without a vote of the either the legislature or the people.

CARB alleges that they imposed not a tax, but a carbon "fee." But a fee is generally charged for a service. No service is being provided to industry. Businesses receive no additional benefit from payment of the carbon "fee". In fact, that money is going right into the general fund. The government can spend it on whatever program it wants anywhere in the state. Further evidence that it's not a "fee." Last month, Governor Brown announced he simply wanted to use the fund to balance the budget.

A factory produces jobs, pays numerous taxes and produces a product, and compensates government with billions in revenues. The factory is a net producer of both taxes and products and is a boon to the economy. Moreover, California emissions have been precipitously dropping each year. Additionally, California already has the toughest environmental standards in the nation. This isn't a fee, it's a sham. It's a tax scam. It's insane. If California wanted to get rid of all emissions forget the Cap and Tax Plan, just simply put a cork in all the factory chimneys. That should do it. Let's hope the Pacific Legal Foundation wins and brings a bit of economic sanity back to what little is left of lunch bucket industries in California.