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Entries in cap-and-trade (2)


Californians OK Deficit-Avoiding Tax Hikes

California has gone where few states go — voters approved temporary hikes to both state income and sales taxes and a legislatively approved climate change measure has gone into effect that will auction off carbon allowances.

Increasing taxes and burdening businesses that spew greenhouse gases are supposed to tank the economy, but California budget analysts say the state could go from a decade of deep deficits to a budget surplus as large as $9 billion by 2018.

Californians also handed over the reins of state government to Democrats, giving Governor Jerry Brown a state assembly with two-thirds majorities in both houses. The last time one party held such a commanding position in the assembly was 1933, according to Bloomberg News.

Of course, the road from deep deficits to budget surpluses rests on more robust economic recovery and continued legislative spending control. A key piece of spending discipline is a legislative decision in 2009 to eliminate automatic cost-of-living increases and inflation adjustments for state programs.

Brown said voter approval of the tax hikes "validates the hard work the state has done to cut its deficit and balance its budget. California is now on the path for a fair and sustainable budget as long as we continue to exercise fiscal discipline and pay down debt."

Still, passing tax increases estimated to generate an additional $6-$8 billion per year until they expire in 2018 is a huge political achievement. The sales tax rate went from 7.25 percent to 7.5 percent and income tax rates rose for taxpayers earning more than $250,000 per year. For filers with $1 million in taxable income, the new state income tax rate is 13.3 percent, reportedly the highest in the nation.

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Energy for an Energy Plan

Governor Kitzhaber has prevailed in persuading lawmakers to approve high-profile initiatives in education, early childhood learning and health care. Now he wants to tackle energy, which could prove a more elusive and tougher sell.

Earlier this year, Kitzhaber handpicked three dozen industry insiders to recommend innovative policy ideas and create a 10-year energy plan. Teams worked for four months, focusing on: 1) consumption/energy efficiency, 2) supply side/resource mix, 3) siting, 4) transportation, and 5) governance.

The group sent its recommendations to Kitzhaber, which now have been made public. Their major theme is reducing carbon dioxide emissions through energy source conversion, more reliance on renewables, and ditching power generation based on high-carbon fossil fuels. Most Oregonians may not know that more than half of the state’s electricity comes from coal-burning power plants.

One big hurdle in accomplishing carbon reduction is already surmounted as PGE has agreed to close down its Boardman coal-fired plant. But even that decision raises thorny questions as the utility looks for a way to replace a source of reliable energy to serve its base load.

Legislators had a previous taste of energy politics when they considered, but didn't act, in the 2009 session on a cap-and-trade proposal, intended to use market forces to encourage businesses with options to switch to energy sources with lower carbon emissions.

Since then, interest has grown in the merits of a carbon tax, which is a more direct disincentive for using fossil fuels. It also is a tax, which raises political flags.

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