Over the last decade, California’s government has been very clever in camouflaging major cost increases as regulations deemed necessary to implement laws. Political leaders promise their constituents that they are against new “taxes,” yet state agencies continue to raise fees or create mandates with high compliance costs for businesses.
A prime example of this is the California Privacy Protection Agency’s (CPPA) latest set of proposed regulations, estimated to impose a $3.5 billion direct cost to businesses – which would result in increased costs of goods and services for consumers.
The public showed its frustration with hidden taxes during the November election and sent a strong message that the cost of living matters and that business as usual is not acceptable.
The CPPA may have heard the public’s message, but was not willing to follow it. On November 8, the agency voted to commence formal rulemaking on proposed regulations to establish a state policy for automated decision-making technologies (ADMT), cybersecurity audits, and risk assessments.
The proposed regulations could be the largest cost increase currently being considered by state government. The regulations will impact large and small businesses and will have the most substantial impact in the next five years – a period in which the state will have multibillion-dollar deficits, according to the California Department of Finance and Legislative Analyst’s Office.
Don’t take CalTax’s word on the costs – the CPPA’s own Standardized Regulatory Impact Analysis (SRIA) determined that the regulations will impose a $3.5 billion direct cost to businesses in the first full year, followed by average annual costs to businesses of $1.08 billion over 10 years, leading to much greater harm to California’s economy, including layoffs and job losses as businesses struggle to absorb these costs.
There will be a negative effect on investment (-$31 billion) due to increased costs and reduced profit margins, which will decrease current output (-$50 billion), employment (-98,000 full-time jobs), and gross state product (GSP) (-$27 billion).
The regulations also will have consequences for education and other state programs that rely on general fund revenue. According to the SRIA, the regulations will cause annual state revenue losses reaching $2.8 billion in 2028.
