A plan to tax the rich to fund electric defeated by California voters

By Peter Valdes-Dapena, CNN Business

California has long been a leader among states, and even countries, in promoting a shift to electric cars, including with its plans to ban the sale of purely gas-powered cars by 2035. But California voters appear to have rejected a ballot proposal that, its proponents claimed, what have helped accelerate that shift by taxing the wealthiest Californians to help pay for electric vehicle tax incentives and EV chargers in the state.

The measure is trailing 59% to 41% according to state results, with 94.8% of ballots counted. CNN has not projected a result.

The initiative, Proposition 30, would have added an additional 1.75% tax on incomes above $2 million. Most of the money was to go toward funding incentives for electric vehicle purchases and installing EV chargers, with a large part of it going to lower-income communities. Another 20% of the funds were to be used to pay for wildfire prevention and additional firefighter training.

Opponents of the ballot initiative claimed it was really just an attempt by one tech company to benefit itself at the expense of other priorities. The initiative is unnecessary at best, they claimed, and might have even harmed the state’s economy by pushing wealthy residents to leave.

The difference isn’t entirely along party lines

While the proposal was backed by the state’s Democratic party, California Governor Gavin Newsom, a Democrat who won re-election Tuesday night, came out publicly against it. In a TV ad, Newsom called it “one company’s cynical scheme to grab a huge tax-payer-funded subsidy.”

Newsom was referring to the ride-sharing company Lyft, which provided 95% of the financing behind the ballot initiative, according to state records. Opponents of the ballot initiative claimed Lyft’s support was self-serving.

State regulations passed in 2021 require that 90% of ride-sharing miles traveled in the state must be emissions-free by 2030. Companies like Lyft and its main competitor, Uber, don’t buy the cars their drivers use, as they consider the drivers to be “independent contractors” who supply their own vehicles. But a rule like Prop 30 would make it easier for just about anyone in California to buy an electric car, including Lyft drivers. Without Prop 30’s state-supported financial incentives for electric vehicles, Lyft might be forced to subsidize its drivers’ EV purchases from its own funds, opponents said.

But being good for a specific industry or company doesn’t mean a law isn’t also beneficial to the general welfare, proponents pointed out. The law could have helped all kinds of low income Californians purchase and charge electric vehicles, not just ride-share drivers.

Lyft referred questions about its backing for the proposition to Steven Maviglio, a political consultant campaigning for the proposal. The company spent nearly $50 million to campaign for the proposal, records show.

It’s harder than it should be for EV drivers to find available chargers in California right now, Maviglio said in an interview with CNN Business shortly before the vote. And electric cars are too expensive for lower income residents to afford, so the financial support is needed, especially with sales of gas cars being banned in the future.

“It’s going to fall harder on those who can’t afford the cars,” Maviglio said.

California an American electric car leader

But there were real questions about whether such a law was needed in a state that already heavily supports electric vehicles.

“California has been prioritizing electrification for, really, the last 10, 15 years,” said Bruce Babcock, professor of public policy and University of California Riverside. “And, so, they are really trying to get this right and they have been funding things.”

While proponents of Proposition 30 pointed out that it would have provided a secure funding stream for electric vehicles, opponents said that was not necessarily desirable and may, counter intuitively, not give electric car sales the boost backers are looking for.

“The job of the legislature is to prioritize spending given the competing demands,” said Babcock. “And so what will happen is, suddenly, you start having a dedicated funding source. What that will do is take the pressure off the legislature and they’ll just fund it less.”

Just as a family given money to buy, specifically, dairy products would probably just spend less of its own money on milk and butter, a law like this could end up not resulting in substantially more money for EVs.

“I don’t know if there’d be a net gain,” Babcock said before the vote, “but it wouldn’t be as big as backers say.”

And an additional 1.75% on income over $2 million might not sound like much — after all, these aren’t people scraping by on their meager salaries — but it would have been taken by a state that already relies heavily on money from its wealthiest residents, Babcock said.

“I think it’s a concern because California gets more than half of its income tax from the top half a percent of taxpayers,” he said.

Other states, like Texas and Florida, tax the wealthy at much lower rates or not at all. By continuing to turn to the wealthy to finance the state’s budget this way, California risks alienating entrepreneurs and investors, Babcock said, in a state with more than its fair share of both. But no such large-scale exodus has apparently ever happened, said Maviglio.

“We have four times as many people making $2 million or more in the state than we did five years ago,” he said. “So that category of people is not leaving the state because of taxes. They’re doing, actually, much better.”

The most crucial objection, though, said Matthew Rodriguez, a political consultant leading a campaign against Proposition 30, was simply the precedent that it would set. Corporations that want certain laws passed can go through the legislative process, speaking with elected representatives in the legislature, rather than trying to put new laws on the ballot. And Lyft has been down this road before. as it was part of a coalition of companies that, through another ballot initiative, avoided having to classify their gig workers in the state as employees. (That ballot measure has been challenged in court.)

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