‘Hidden Gas Tax’ Said to Cost California 18,000 Jobs

The “hidden gas tax” scheduled to hit California drivers on Jan. 1, 2015 will result in a net reduction of nearly $3 billion in economic output and 18,000 jobs in the first year alone, according to analysis released Sept. 16 by the California Drivers Alliance (CDA). The study, conducted by Justin L. Adams of Encina Advisors, maintains there is also a nearly one-in-five chance that allowance prices in California’s cap-and-trade system could be 300% higher than expected, meaning economic losses could skyrocket to $10.8 billion and 66,000 jobs in 2015.

“The consensus among economists is that the costs to purchase emission allowances for gasoline and diesel starting next year will have a significant impact on consumers at the pump,” said Adams. “As a result, placing fuels under the cap-and-trade system places an additional burden on California households, lowering their income, and resulting in reduced economic activity and widespread job losses. The only question is how high will the allowance prices be next year and beyond.”

Figures from the U.S. Bureau of Labor Statistics show that families making less than $40,000 a year spend up to 38% more of their income on gasoline compared to families making $70,000 or more. According to the Encina Advisors analysis, low-income Californians would be hit doubly hard by the “hidden gas tax” because many of these individuals work in service industries where job losses would be most severe. Job losses would be widespread across multiple service industries that are dependent on consumer spending, but losses would be greatest for food and beverage services, health service practitioners, and retail establishments and their suppliers.
“Consumer spending drives employment in the retail and service industries,” said Bill Dombrowski, president of the California Retailers Association. “Policymakers should be deeply concerned that this program will put thousands of Californians out of work, many of whom live paycheck to paycheck.” The analysis also found that net job losses would be greatest in 2015 because spending by the state will not generate activity sufficient to offset the economic losses. “The California Air Resources Board is advancing this vast expansion of cap-and-trade with no regard to its impact on our economy,” said Ruben Gonzalez, senior vice president for public policy and political affairs at the Los Angeles Area Chamber of Commerce.