That could change under the FCC’s proposal to treat the Internet as if it were a 1930s telephone company. If that happens, you could see your taxes rise sharply.

Warn Grover Norquist and Patrick Gleason of Americans for Tax Reform:

The Federal Communications Commission is in the middle of a high-stakes decision that could raise taxes for close to 90 percent of Americans. The commission is considering whether to reclassify broadband as a telecommunications service and, in doing so, Washington would trigger new taxes and fees at the state and local level.

The agency would like to make Internet service a public utility, placing broadband under Title II regulation of the Communications Act of 1934. This move would make broadband subject to New Deal-era regulation, and have significant consequences for U.S. taxpayers.

Under this decision to reclassify broadband, Americans would face a host of new state and local taxes and fees that apply to public utilities. These new levies, according to the Progressive Policy Institute (PPI), would total $15 billion annually. On average, consumers would pay an additional $67 for landline broadband, and $72 for mobile broadband each year, according to PPI’s calculations, with charges varying from state to state.

This would be doubly bad for California. State and local taxes would go up.

But the tax increases in the other 49 states and their local governments also would hit us, because the money, in the end, would come from California’s Internet companies: Netflix, Google, Apple, Facebook, etc.

And according to Avalara, which helps businesses collect local taxes, there are “more than 14,500 local taxing jurisdictions” in America.

In the 1930s, top auto brands included Studebaker, Packard and DeSoto. There were no interstate highways or passenger jets. Going from L.A. to New York City meant taking a several-day train ride. TV was a lab experiment. And calling long-distance meant dialing an operator and paying a high bill for each call.

Does that sound like our world? It does to the FCC.

By Chris Reed

Jerry Brown has talked such a good game on regulations that he often gets credit for being a stalwart on the issue — even when all he ever does is offer lip service.

That’s why Dan Walters’ column on the topic is so maddening. He presents a 2 + 2 scenario, and then doesn’t mention it adds up to 4.

“As attorney general and governor, he embraced one of the state’s most comprehensive regulatory schemes, aimed at reducing emissions of carbon to retard global warming.

“Brown threatened to sue local governments that didn’t meet his global warming standards, endorsed a shift in power generation to non-carbon sources that will raise utility costs and embraced cap-and-trade emission controls that will exact billions of dollars in fees from business.

“But he’s also criticized CEQA, signed by his predecessor, Ronald Reagan, as a ‘blob,’ called for streamlining its procedures and quipped, ‘I’ve never seen a CEQA exemption that I don’t like.’

The governor doesn’t just do his shtick in California. He’s also performing this week in California, noted Walters:

“‘We’ve got more damn laws than you can think of,’ Brown told one gathering, adding that there are ‘endless ideas’ about adding more regulation and he sees his job as ‘to find a way to cut through that.’

“‘To the extent you have any red tape, there’s no one more anxious to reduce it,’ Brown told an appreciative group of business people.

“So does Brown really want to lower regulatory hurdles or is it just a convenient and momentary posture? With Brown, one never knows.”

That last paragraph is kind of mind-boggling. Where’s the beef? Where’s the evidence that Jerry’s libertarian rhetoric has any follow-through at all?

Dan?

Dan?

Dan?

Sheesh.

By Chris Reed

So let’s get this framed correctly: California is the leader in a form of home entertainment that is immensely popular around America and the world, for better or worse. If California adopts rules that wipe this industry out, it is 100 percent certain to move to other other states and continue flourishing — and with the same seemingly minor health downsides that led the Golden State to push the industry away. So moral posturing by California leaders will achieve nothing but destroying jobs and driving an unsavory but legal and very profitable state industry to other states and nations.

Stupid, right?

But this is California. Stupid moralistic posturing is what we do best.

So first Los Angeles County voters declared war on this industry. And now, according to the Contra Costa Times, a lawmaker thinks that it is the state Legislature’s turn.

“Assemblyman Isadore Hall III, D-Los Angeles, announced he’s holding a news conference … to introduce a bill requiring condom use in all adult films produced in California.

“Hall will be joined by Michael Weinstein, president of the AIDS Healthcare Foundation and Darren James, a former adult film actor who contracted HIV while working in the porn industry. The assemblyman’s news release said his bill would ‘provide statewide uniformity needed to ensure that the thousands of actors employed in this multi-billion dollar industry are given reasonable workplace safety protections needed to reduce exposure to HIV and other sexually transmitted diseases.’

“About 57 percent of Los Angeles County voters in November approved Measure B, requiring the use of condoms in all adult films produced within the county.

“The Adult Industry Medical Healthcare Foundation conducts regular screenings of porn performers, which has minimized the spread of HIV and other diseases. But James was believed to have contracted the virus during a film shoot in Brazil, and transmitted it to several actresses here in California before he tested positive a few weeks later in 2004.”

Notice the economic ignorance on display in Hall’s legislation, specifically the presumption that “this multi-billion dollar industry” will stay in California once it faces regulations that are unusual in its niche field and that won’t be the norm elswhere.

Posturing vs. facts vs. unexpected consequences

But Sacramento is so mindbogglingly stupid that recent governors and a majority of legislators believe higher energy costs are good for the economy, so who knows? Maybe they think smut will bloom once it is micromanaged by state bureaucrats.

Here’s what the rational people sound like — namely, the First Amendment defender, the Libertarian Party official, the businessmen and the physicians who wrote the ballot statement against Los Angeles County’s condom measure:

“Every single actor is tested at least monthly. In 8 years, not one has contracted HIV on a set anywhere in the U.S. In fact, by driving film productions underground where there is no testing and no industry regulations, actors would be less safe, not more.”

No real health issues? Possible unexpected consequences? Who cares! Let’s regulate.

As a libertarian, I feel like this is a no-brainer. I honestly would be surprised if any rational person of any ideology who detaches the factual details (exaggerated problem, ease of industry exit, legality of conduct) from the moral preening (it’s porn!) thinks a Los Angeles County or state ban makes sense. I know they might not say this in public because it’s easily smearable and easily mocked. But in their heart of hearts, or their brain of brains, smart people have to know it’s true.

Jobs are good. Losing jobs? Bad.

Duh.

By John Hrabe

California’s cap and trade regulators can’t seem to do anything right. Taxpayers, businesses and even some environmentalists are exposing the serious flaws with the state’s carbon auction.

Small businesses have criticized the landmark greenhouse gas emissions law for being “the greatest threat to the growth of our business in California.” On the eve of the state’s inaugural cap and trade auction, the California Chamber of Commerce filed a lawsuit claiming that the state was illegally profiting from the sale of “free” emission credits. The next day, the auction itself proved to be a major disappointment, yielding less than a dime more than the floor price for carbon allowances.

Of course, the California Air Resources Board promised an open and transparent process. “We’ve erred on the side of making this program transparent and enforceable,” Mary Nichols, chairwoman of the California Air Resources Board, told the San Jose Mercury News in an interview before the auction.

But CalWatchdog’s Katy Grimes has detailed the extensive secrecy pervading the auction. The agency refused “to publish any information about the bidders or the amounts they purchased.”

A new report provides one explanation for the secrecy. “The state disqualified 66 percent of companies’ offers from the auction,” a Bloomberg analysis has found. “After the disqualifications, the state had 1.06 legitimate bids per permit for the 23.1 million permits put up for sale on Nov. 14. Last month the state reported it had 3.1 bids for every permit available.”

The high number of bid disqualifications exposes the inherent flaws in the auction process.

How the carbon auction works

California’s carbon auction isn’t run like a normal auction. There’s no auctioneer progressively recognizing the highest bidder. The bidding process also isn’t managed like a typical online auction, such as eBay. Instead, the state sells carbon allowances in a single-round, sealed bid, uniform-price format.

“This is done by awarding the first allowances to the highest bidder, then the next highest bidder, and so on until all allowances (or bids) are exhausted,” explained Robert Stavins, director of the Harvard Environmental Economics Program. “The bid for the last allowance becomes the price of all allowances sold in the auction.”

The amount of the highest bid is irrelevant. And the identity of the highest bidder is never revealed. All bids remain secret throughout the entire process.

“Nobody can be certain because the market rules prohibit any one particular bidder or qualified bidder from stating whether they submitted a bid or talking to other bidders about bidding or price-fixing or manipulation,” said Timothy O’Connor, attorney and director of California Climate & Energy Initiative at the Environmental Defense Fund (EDF) on a Nov. 28 conference call and webinar on the auction. “So there’s very tight control over the information about who actually submitted bids. And that’s appropriately done to protect the market.”

Uniform-price auctions: under-pricing and incentive to collude

As hard as the state tries to prevent collusion, some experts believe that uniform-price auctions inherently create a self-enforcing strategy of collusion. That was the conclusion of a trio of financial experts in a 1995 report for the Federal Reserve Bank of Atlanta, which evaluated uniform-price auctions and treasury notes.

“In fact, in uniform-price auctions of shares, there exist self-enforcing strategies for bidders that allow them to ‘collude,’” they wrote in “Collusion in Uniform-Price Auctions: Experimental Evidence and Implications for Treasury Auctions,” a September 1995 working paper. “In doing so, they are able to maximize their payoffs at the expense of the auctioneer.”

That means the state isn’t selling the carbon allowances for their true worth, which could explain why the state so badly missed its revenue projections. CARB chief Nichols predicted revenue of “$500 million to $1 billion in the first year.” Yet the auction netted the state’s new Air Pollution Control Fund just $55 million.

“Uniform-price auctions are often criticized because they give rise to underpricing equilibria due to bidders’ market power,” wrote Sylvain Bourjade, a professor of finance at the Toulouse Business School, in “Strategic Price Discounting and Rationing in Uniform Price Auctions.” “Consequently, truthful bidding is not the optimal strategy, and the bidders have an incentive to shade their bids.”

In an effort to earn public approval for the controversial auction, most of the money from the carbon auction goes back to ratepayers, an extremely inefficient and roundabout system. The California Public Utilities Commission recently decreed that 85 percent of the revenue would go to a “climate dividend,” which comes out to $5 per month for most ratepayers.

“The California Public Utilities Commission came out with a plan that will actually pay what they call a ‘climate dividend,’” explained KQED Science Editor Craig Miller. “If there’s an increase in your electric rates as a result of cap and trade and the fees that companies are having to pay, you will get that money back in the form of a couple dividends every year, and might even make some money on the deal.”

Some environmentalists are questioning another accounting gimmick.

Cap and trade: false accounting of greenhouse gas reductions

On Dec. 7, the California Air Resources Board went back to San Francisco Superior Court to combat a lawsuit by the Citizens Climate Lobby, which has challenged the state’s cap and trade program.

“We are challenging the offset regulations approved by the California Air Resources Board because they would allow a false accounting of greenhouse gas reductions, contrary to the letter and spirit of AB 32,” the organization explains in an informational sheet on its website. “A false accounting is worse than doing nothing because it gives people the impression that the climate change problem is being addressed when it is not.”

Mark Reynolds, executive director of the Citizens Climate Lobby, believes that the offsets undermine the potential environmental benefits of AB 32. “These offsets create a huge loophole in the effort to limit greenhouse gas emissions and would allow additional fossil fuels to be burned above the cap or limit provided for in AB 32,” he said in a press release.

Time magazine reports that “greenhouse gas carbon dioxide hit a record high in 2011, and will almost certainly reach a new record of 35.6 billion metric tons in 2012.” A recent journal article published in Nature Climate Change claims that global temperatures will continue to rise and that the serious consequences of climate change are “all but inevitable, no matter what we do in the future.”

Consumers pay higher electricity bills. Small businesses suffer “the greatest threat to growth.” Environmentalists say greenhouse gas reductions aren’t happening fast enough. All of which makes you wonder, “Is anyone benefiting from the state’s carbon auction?”

Green regulators are benefiting, of course.

Not only has CARB received millions of tax dollars to implement AB 32, the additional monies have come with minimal oversight. This year’s 18th U.N. climate change summit, which is attempting to negotiate a replacement for the Kyoto Protocol, is taking place in Doha, Qatar, “the largest per capita emitter of greenhouse gases in the world,” according to Democracy Now’s Amy Goodman. A columnist for the U.K.’s liberal Guardian newspaper described it as home to “some of the most inefficient, profligate, carbon-spewing power generation in the world.”

The difference between the federal government’s go-slow-or-is-it-no-go approach on the Keystone XL oil pipeline and the let’s-get-it-done push for the first segment of the California bullet train is instructive, in that in both cases we are told that environmental rules need to be taken seriously and rigorously enforced. Hence this paragraph in the Wednesday Mercury-News story about the (tiny) delay to the formal federal go-ahead for bullet-train work in the Central Valley:

Even though Congress and President Barack Obama previously approved enough funding to split the cost of the initial stretch of track, U.S. officials still needed to ensure the project met federal environmental laws. Wednesday’s 41-page ruling said that while the bullet train will have “significant” negative impacts on the environment and community — from loud noises to reducing property values — it’s still worthwhile.

But wait a minute: So now whether a project is “worthwhile” is somehow a formal metric for approval? Isn’t “worthwhile” kind of an ultimate eye-of-the-beholder thing? Are there federal standards for worthwhileitude that someone can cite? So the preposterous, lie-driven bullet train is worthwhiler than Keystone, which could transform the already-wildly-improving U.S. energy picture? Sheer insanity.

Thankfully, we know that there are actual federal regulations that can be used to tie big infrastructure projects into knots — even “good” ones — and rich cities in Silicon Valley are eager to use them. Go, NIMBYs, go. Administer a beating to the bullet-train nuts. A worthwhile one.

By LAER PEARCE

California lost about five and a half companies a week to other states in 2011, as the mass migration to avoid California’s hostile business environment grew.  You would think a governor who is hungry for tax revenue — and California has one of the highest corporate tax rates in America — would do something to slow the tide, but Jerry Brown’s new budget proposal tells another story.

First, bureaucracies like the California Air Resources Board that are highly efficient in throttling businesses have nothing to fear in the new budget. Brown is all-in on CARB’s anti-global warming campaign, as AB 32 implementation is unscathed in the budget.  Brown is not thinking about the war on greenhouse gases’ expected $180-billion-a year hit on the California economy; rather, he’s focused on the $1 billion in new 2012-2013 tax revenues he anticipates collecting under the state’s new cap and trade law.

But that’s just the tip of the supposedly rapidly melting iceberg.  Tucked away in the “making government more efficient” section of the budget is a proposed new anti-business government bureaucracy, the Business and Consumer Services Agency, that should speed up the flight of employers from California.

Super-Agency

Under Brown’s proposal, the Department of Consumer Affairs, the Department of Fair Employment and Housing and a handful of business licensing and inspection departments will be merged to form the new agency.  Fair enough.  Maybe they will be able to find some efficiencies.  But the red flag for business owners is this:  Into this amalgamation of bureaucracies that fundamentally see business as the enemy, Brown is dropping “the newly restructured Department of Business Oversight.”

Scan the list of 380 state agencies and you’ll find no Department of Business Oversight, so it appears this isn’t a case of restructuring an existing agency, but of creating an entirely new one.  California’s already excessive amount of business oversight is one primary reason why CEO Magazine listed California as the worst state for business for the last four years in a row.  Creating a new department tasked to impose yet more controls on business, and placing that department in an environment that’s already steamy with anti-business hubris, will only make things worse.

How anti-business are the foundational agencies of the new Business and Consumer Services Agency?

The Department of Consumer Affairs has 40 different regulatory entities like the Professional Fiduciaries Bureau, the Telephone Medical Advice Services Bureau and the Hearing Aid Dispensers Bureau, each responsible for regulating a segment of the California economy.  Under a two-year initiative to increase the oversight it imposes, the department is seeking to quadruple the number of investigators on its staff and to add a new Deputy Director for Enforcement and Compliance.

The Department of Fair Employment and Housing opens about 4,000 new cases a month where a business, landlord or lender is charged with discrimination — 195,000 cases in total in 2010.  If a complaint goes forward, the department’s attorneys represent the complainant at no charge, and the average settlement against businesses, once charges are filed, is $40,000.

New Parasites

Certainly, there are scoundrels out there, along with bigots and guys who don’t know where to keep their eyes, hands or comments, and any state needs agencies to corral them.  But Brown appears to be up to much more with his new super-agency.  This new agency would assuredly go well beyond that charter, creating new opportunities for the attorneys that feed off of California businesses — attorneys who gave well over $1 million to Brown’s election campaign in 2010.

If California had a pro-business governor, his budget would have proposed a new pro-business department.  That we have instead a new Department of Business Oversight in a new Business and Consumer Services Agency tells us a lot about the kind of governor — and the kind of state — we have.

Laer Pearce, a veteran of three decades of California public affairs, is completing a book on California’s impending collapse, “Crazifornia: Tales from the Tarnished State.”