California Oil Tax?

Signal Hill Oil Field, probably 1940s

There is currently an initiative for which in theory signatures are being gathered that would gasoline and other fuel to fund a cap on tuition.  I could go into the details but this is one of the many initiatives that are filed without any funding to pay signature gatherers or run a campaign.  It will go nowhere.  Signatures are actually due tomorrow.  There is a link to it below for those who are curious.

However, the same wealthy individual who successfully pushed through Prop 39 last year is now pushing the legislature to use its supermajority to pass an oil severance tax.  The supermajority, however, is tenuous and it’s not clear that the governor would support such a measure.  Technically, if it were passed by a supermajority, the same supermajority could override a veto.  

The governor’s political pledge in 2010 was no new taxes without a vote of the people.  While the governor hasn’t said anything about running for reelection in 2014, it is widely assumed that he will.  So any tax that appeared to ignore the vote-of-the-people pledge would be problematic for him. Nonetheless, a ballot measure for an oil severance tax – as opposed to a legislative bill – would ultimately be put to a vote of the people and would not violate the pledge.  Hypothetically, such a tax could go in some way toward tuition or student aid.  We have previously noted that there is already a tobacco-tax-for-student-aid initiative in circulation that appears to have some serious players behind it.

Economists tend to like oil severance taxes because the world price of oil is not likely to be very sensitive to California production and therefore the incidence of such a tax falls on the producer, not the consumer.  But if such a tax were to get on the ballot, the anti-ads would undoubtedly claim that the cost of gasoline would go up.  For that matter, health professionals tend to like tobacco taxes because their incidence would likely fall on the consumer and thus discourage smoking.

In any event, as 2014 approaches, we are entering into a new political season.  More on that in a later posting.

The not-serious fuel initiative mentioned above is at:
http://ag.ca.gov/cms_attachments/initiatives/pdfs/i1063_12-0015_%28college_tuition_&_fees%29_v2.pdf?

The more serious tobacco tax for student aid initiative is at:
http://ag.ca.gov/cms_attachments/initiatives/pdfs/i1066_12-0018_%28tax_to_fund_higher_education%29.pdf
[signatures are due in July]

An article about the possibility of an oil tax is at:
http://blogs.sacbee.com/capitolalertlatest/2013/04/environmentalist-tom-steyer-calls-for-new-oil-tax-in-california-1.html