LOS ANGELES -- It is hard to find positive attributes in a proposition imposing a new tax on oil produced in California that will go before the state's voters in November. Yet, Phil Angelides, his long political career at stake in next Tuesday's Democratic primary for governor, chose last week to endorse this dubious measure.
Angelides, state treasurer of California and an experienced professional politician, decided to bet that coming out against Big Oil would offset the dangers of a proposal almost certain to hit the pocketbooks of ordinary Californians. What's more, nobody rules out the possibility that Republican Gov. Arnold Schwarzenegger may join Angelides in supporting the oil initiative despite his no-new-taxes pledge.
California led the national tax revolt in 1978 by passing Proposition 13, which slashed property taxes. Twenty-eight years later, the Golden State will be watched closely as a test for the political effectiveness of betting against unpopular oil interests despite the downside in public policy. With Big Oil and Silicon Valley facing off against each other in expensive campaigns, the referendum will be watched by the rest of the country.
The Clean Alternative Energy Act would impose a severance tax on California-produced oil (comprising 12 percent of all U.S. production) as high as 6 percent, with the expected $380 million a year revenue devoted to producing alternative fuels. That kind of industrial policy excites the interest of Silicon Valley.
The measure purports to bar oil producers from passing the tax on to consumers and other users. But the California Legislative Analyst's Office (operating under the Democratic state attorney general's office) in the report on the initiative asserted "it is unclear the extent to which" this prohibition can be enforced. The report questions how in the world the state Board of Equalization could determine whether or not any price increase in fuels should be traced to payment of the severance tax.
That is not the only problem foreseen in the report by Elizabeth G. Hill, the state legislative analyst. The severance tax could reduce property tax, income tax and gasoline tax revenues. The report continued that the tax "could result in a reduction in economic activity reflected . . . in a reduction in jobs."