Cleaning Dirty California Tap Water Doesn’t Require A New Tax

Cleaning Dirty California Tap Water Doesn’t Require A New Tax

Last June, then-Gov. Jerry Brown and Sacramento’s political leaders dropped a proposed tax on drinking water. But Gov. Gavin Newsom, following the California Way, apparently aims to bring it back. Newsom, the Los Angeles Times reported “has embraced an idea that has previously failed to gain traction in Sacramento: new taxes totaling as much as $140 million a year for a clean drinking water initiative.”

During his Feb. 12 State of the State address, Newsom devoted about 100 of his 4,440 words to “talk honestly about clean drinking water,” which included, naturally, his plea for a new revenue stream to solve the problem.

“Just this morning, more than a million Californians woke up without clean water to bathe in, let alone drink. With respect, this is a moral disgrace and a medical emergency,” said Newsom.

He has, it seems, allies. Four days before Newsom’s speech, the Voice of San Diego reported that “the Legislature looks increasingly likely to impose a statewide tax to fund more water projects.” Yes, of course. When confronted with moral disgraces, medical emergencies, and Mencken-esque imaginary hobgoblins, politicians reflexively, and myopically, reach for political solutions. True to the handbook, Newsom declared that “solving this crisis demands sustained funding.”

Is this true? No, not at all.

Water is a commodity than can and should be bought and sold in markets just as other commodities, several of them also essential to human life, change hands in markets. There’s no reason that water should be singled out as a product only government can provide.

In fact, it’s such an important commodity it should not be left in the hands of politicians.

Water markets work. Markets in Australia, for instance, have been “very successful at achieving efficient, flexible water transfers between users,” according to The Conversation. The Chicago Policy Review has said “the overall potential economic and ecological benefits of water markets arguably make them worthwhile.” Oregon, Colorado, and Nebraska have effective water markets.

Closer to home, a pilot program in Ventura County operating under the authority of the Fox Canyon Groundwater Management Agency is moving ahead and “could eventually serve as a model for the rest of California,” the Water Deeply news and analysis site tells us.

Water markets have an advantage over public water systems in that they are not burdened with “top-down, command and control regulations,” nor are they smothered by a “byzantine set of rules and pricing requirements” that “create absurd market inefficiencies.” Consumers have an incentive to conserve in markets, sellers have an incentive to deliver quality products, the challenges of the drought-cycle are avoided, prices would reflect supply and demand rather than bureaucratic commands, and those inefficiencies are rooted out.

Water markets won’t clean Californians’ dirty tap water overnight. A full transition would take some time. But a new tax is not the answer. If money is needed, it’s already available. California will spend nearly $200 billion over the 2018-19 fiscal year ending June 30. It wouldn’t be hard to find $140 million of fat in a spending package that big which can be redirected toward clean tap water.

Simply shifting funds won’t make a big splash like a new tax would, though. Practical solutions are useless to most politicians for that reason.

Kerry Jackson is a fellow with the Center for California Reform at the Pacific Research Institute.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.