Gavin Newsom fighting to save California’s ultra-rich from tax hike intended to subsidize transition to EVs

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This year, Governor Gavin Newsom is opposing a ballot measure to fund the transition to electric vehicles – siding with Republicans and against fellow Democrats, environmental groups, firefighters and labor unions. The governor’s counterintuitive position could be a political gambit. It may also doom the measure; support for it appears to have dropped starkly after Newsom cut an ad against it. Courtesy Photo by Justin Sullivan/Getty Images

Joseph MacKinnon | Contributed

California Gov. Gavin Newsom (D) claimed earlier this year that the “future is electric.” In 2020, he signed an executive order to phase out the sale of all new gasoline-powered cars by 2035. Now, he’s aligned himself with California Republicans to fight a new tax hike. However, unlike the various other tax increases opposed by the state’s Republicans that adversely impact the middle class, the tax hike Newsom has elected to fight would be one specifically imposed on the ultra rich.

The tax hike

Proposition 30 calls for a 1.75% tax hike on those earning over $2 million annually. It has been touted as a means to help subsidize the statewide adoption of so-called “zero-emission” vehicles and the development of EV-charging infrastructure.

According to the California Legislative Analyst’s Office (LAO), the tax hike would go into effect January 2023 and last until California “is able to drop its statewide greenhouse gas emissions below certain levels,” or, failing that, until January 2043.

About 45% of the revenue from the new tax would go toward payments to help buy new electric vehicles (e.g., cars, vans and pick-up trucks). In addition to helping households and businesses “pay for part of the cost of new passenger ZEVs,” money confiscated from high-income taxpayers would also be allotted for the government’s acquisition of large EVs such as trucks and buses.

Another 35% would subsidize the installation and operation of EV charging stations, which will be located in both private and public locations, and 20% would go toward wildfire response and prevention. Priority would be given to expenditures on hiring, training, and retaining state firefighters.

The money will not be disbursed on a consistent basis. Instead, “at least half of the money must be spent on projects that benefit people who live in or near heavily polluted and/or low-income communities.” The affluent areas home to some of those who will be taxed under the initiative will have to compete with rural areas for the remainder of the funds.

The LAO claimed that the tax would raise between $3.5 billion and $5 billion annually, “growing over time.”

The LAO noted that, in light of recent efforts to increase the number of EVs sold and on the roads, “the additional funding from the proposition to help buy new ZEVs would not have much effect on the total number of ZEVs driven in California.” It would, however, “shift who pays for the ZEVs. That is, more costs would be covered by revenue from the new tax on high-income taxpayers instead of by vehicle sellers and/or buyers.”

The tax’s supporters include the CA Association of Electrical Workers, Cal Fire Local 2881, the California Democratic Party, the American Lung Association, Lyft, and a host of municipal authorities across the state.

Neel Sannappa, a Democratic political analyst, claimed the tax would “help middle-class families transition to zero-emission vehicles,” as well as strengthen the electric grid, which is already under immense strain.

The multimillionaire’s Robin Hood

In a television ad attacking the proposition, Newsom suggested that the proposed tax hike was “devised by a single corporation to funnel state income taxes to benefit their company. Put simply, Prop. 30 is a Trojan horse that puts corporate welfare above the fiscal welfare of our entire state.”

The corporation Newsom referenced in the attack ad was Lyft. Newsom and other critics have suggested that Lyft, which has allegedly donated over $35 million in cash and in-kind contributions to support the measure, would directly benefit from it.

The Guardian reported that the perceived benefit to Lyft is that its drivers, who are responsible for their own vehicles, would be better able — as a result of the multi-millionaire-sourced subsidy — to acquire an EV by the state’s 2030 regulatory deadline.

Denny Zane, founder of Move LA, a public transit lobby group, said the accusations were “just false,” noting that Lyft had offered its support only after environmental groups and policy makers had drafted the idea.

Bill Magavern, one of the authors of the bill and the policy director of Coalition for Clean Air, told KUSI that the “initiative was devised by an environmental-labor-business alliance, and it provides absolutely no special benefits to any company or any special interest.”

Magavern characterized Newsom’s opposition as giving in to the wishes of the wealthy: “You’ve got billionaires and their allies who don’t want to pay their fair share of taxes.”

The attack ad featuring Newsom was paid for in part by a California-based billionaire, Michael Moritz, a repeat Lincoln Project donor who has reportedly spent $1 million to fight Proposition 30.

Bob Emery, a wealthy San Francisco real estate investor, donated nearly $500,000 to the opposition campaign. Former Apple board member and Silicon Valley venture capitalist Arthur Rock donated $499,000. Gap Inc. director William Fisher donated $980,000 to the “No on 30” campaign in September.

In addition to the support from the ultra rich, “No on 30” also garnered support from the California Teachers Association, which was antipathetic because 40% of the state’s budget, as mandated in 1998, must go to public education, but as this would be a special fund, revenue might be withheld from education coffers.

Republican political analyst Cathy Abernathy told Fox40 that part of the reason Newsom and the California Teachers Union don’t like the proposition is because it “is a special fund, permanently separate and apart from the General Fund or any other state fund or account. And in Section (c), moneys deposited into the fund and any interest earned shall not be permanently or temporarily borrowed, loaned or otherwise transferred to the General Fund or other fund in the state treasury.”

In other words, the Newsom administration wouldn’t be able to use it as a slush fund.

Proposition 30 will be on the ballot in California in the upcoming November election.

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