California’s Proposition 87 would: [ul]
[li] Establishes $4 billion program with goal to reduce petroleum consumption by 25%, with research and production incentives for alternative energy, alternative energy vehicles, energy efficient technologies, and for education and training. [] Funded by tax of 1.5% to 6% (depending on oil price per barrel) on producers of oil extracted in California. Prohibits producers from passing tax to consumers. [] Program administered by new California Energy Alternatives Program Authority. [] Prohibits changing tax while indebtedness remains. [] Revenue excluded from appropriation limits and minimum education funding (Proposition 98) calculations. [/ul] In favor of it are the Democratic Party, and Bill Clinton and Al Gore, among many others. Opposed are the Republican Party, Arnold, many business groups, most big newspapers. (The YesProp87 websites misleadingly lists endorsements by both the Los Angeles Times and the San Jose Mercury News.)[/li]
Be sure to check out the non-partisan details and the partisan [del]red-meat[/del]arguments.
I’m still undecided, but leaning towards no. I like the idea of government-funded investment in alternative energy. I think we need to develop a non-carbon-based energy economy. But taxing oil production? That will make foreign oil relatively cheaper, and increase its use, at least in the near term.
The opposed camp says the Prop will raise gas prices, and I agree. But that’s a good thing! If I’d written the initiative I’d put a $1 per gallon tax on gasoline and diesel to fund the same things. The pro-camp is in economic denial if they think prices won’t go up (decreasing supply and/or increasing production costs with near-term fixed demand means higher prices). We should be taxing the demand, not the supply, but the tax will decrease consumption (which is good).
So, should I vote no? Or, can anyone convince me to vote yes?
The only thing this will do is decrease CA production. Have no idea why they’re saying it’s going to attack consumption when, in fact, it does nothing of the sort.
The thing is BS. Assuming that the claims of “not allowing the tax to be passed on to the consumer” is true, and the mechanism works, all this does is move oil production away from CA with no change whatsoever in oil consumption. It’ll decrease your job base, make you more dependent upon out of state and foreign oil, it’ll just be another reason not to invest or move jobs to CA.
I dunno. How do they stop the producer from passing the costs of the new tax to the consumer? The producer can raise the price of their product for other reasons, like increased labor costs… This doesn’t sound enforcable, to me.
This proposition sounds like a cash grab. Who decides where the money collected gets “invested”? A government appointed body. (Which means that whoever gets to appoint these jobs gets more power, by being able to reward supporters and friends with government jobs. I thought croney-ism was bad?) I suspect that they will end up funding various pork “studies” and paying “consultants” fat paychecks.
Why should I believe that this tax will produce the results claimed? For example, consider the anti-tobacco taxes. (Another CA State propisition is up for vote this time around on that topic, proposing to add another $2.60 per pack of smokes.) Did that produce results? I dont see any results.
There was an initiative for state funded preschooling. (Intended to help the working poor.) Most of the money collected got farmed out to “consultants”, and funding more political ads (for collecting yet more bonds and taxes).
This attempt at social engineering through “penalty” taxes is popular lately, but I can’t realistically see the results as claimed to come about through them.
I don’t think that subsidizing alternative energy is a particularly good use for this tax money, and I’m wary of initiatives that require a certain use for tax money. 30 years from now, we’ll still be stuck with whatever definitions are in the law right now.
The law is ambiguously written as to how the tax would actually be calculated (at least, according to my voter information packet). It might be applied to the marginal value of the oil over a certain amount, like the federal income tax, or it might be applied as a single rate for the whole barrel, if prices are high enough. If they can’t even manage to write the law so that it will clearly state how much tax to collect, I don’t have a lot of faith that the law won’t also have a lot of bad unforeseen consequences. Aside from all of the bad foreseen consequences already mentioned here.
I’m voitng “no” for the reasons other have given, but also because it violates my rule against being able to understand an initiative in 1 minute or less. We’re not suffering from a lack of laws in this country, and if you want to add another one, give me a real good reason and make it simple. Most initiatives are pieces of crap, so my default position is “no”.
Well, if oil extracted in the state of CA is taxable, and the costs aren’t passed onto CA residents, then they’ll get passed to out-of-state consumers of that oil (which obviously cannot be enforced). Thus, no skin off the nose of the people in-state while passing the buck out (and profiting in the process).
This seems so wrong on so many levels. First you are making it a disincentive to produce oil under US environmental laws, which I would say is the cleanest and safest way to produce gas from oil extraction. Second raising the cost of gas is one of the worst things you can do for the lower working classes, talk about regressive.
Well, we flushed billions down the “synfuels” rathole a couple of decades ago, and we have zilch to show for it.
What people don’t realize about technological progress is you can’t mandate it. We are talking about committing scarce research dollars. Who is best at administering research? History has shown us that private capital investment trumps government administration of research dollars. Private entities have an incentive to get return on their investment so they are more likely to invest in lines of research that will bear fruit. A government allocation board? Not so much. California is now spending 6 billion dollars on stem cell research, and I predict with confidence that this will not produce a single cure or even promising line of inquiry.
And if you don’t think that higher taxes aren’t going to be passed to the consumer then I have a big orange bridge in San Francisco to sell you.
More worrying to me is the nearly 50 billion in bonded indebtedness that is on our ballot. California is already in the hole, and this would dig us deeper.
I am always amazed at how quick liberals are to embrace highly regressive taxation. Cigarettes, gas, beer, all these get targeted for taxes by certain “meatheads” and all are disproportionately payed by the poor. I guess the only poor folks that count any more with the bleeding heart set are the ones sneaking over the border…
Besides that, Texas and Alaska already tax oil drilled in their states (link) while California does not. Sure there are other taxes, not this one.
I fail to see the argument that oil producers would cut production when prices are over $60 a barrel - the only time the full tax cuts in. There is no tax at all if prices are under $50 a barrel. No matter what they are saying now, would any sane businessman cut production of a commodity when the price is at historic highs? You guys must really think they’re stupid.
I’m okay with California becoming as anti-oil as Texas myself. I’m voting for it.
To keep production at a given level replacment drilling or work over of existing well operations are required, wells don’t last forever.
If production cost go up it makes it becomes more attractive to invest money elsewhere than it is to invest to maintain production in California. This leads to a general downward trend in production in California.
The small local independents may not have much option but to stay drilling in California, they will find it a little harder to raise capital to continue operations (why would banks lend to a company with lower ROI, hence cost of capital rises)
Larger companies will switch their investment elsewhere. Internally oil company regional production divisions present their cases for investment to internal investment boards, those with the best ROI get the cash.
Obviously this is all balanced against production risk, stability (revolution and gunfire in california any time soon?) and proximity to market, refiners and crude quality. Kern crude is pretty sweet and light and lots of people sea to use a lot of gasoline in California so that wil keep the investment there. There is also a lot of preexisiting infrastructure, so that also improves the ROI by lowering entry costs.
So there will probably be somewhat of a lowering of investment leading to a longer term reduction in california production, but I would doubt an immediate production drop. Whilst not producing does keep the oil in the reservoir and essentially in the bank awaiting a better selling market, the market probably is not going to get much better than it is today, taxes or not.
I would agree this tax will not do much for curbing emmisions or consumption or provide any incentive for anyone to develop economical alternatives, as the consumers see no difference in their cost so no need to switch. if teh reasoning is simple, those dudes made a chunk of cash and we want some of it, fair 'nuff but will they windfall tax all industries that make a good ROI and net?
I am all for this tax to be as high as possible, as I would like some of the bankers investment bucks to head further south.
The math seems a little off. As I understood it, they are taking the increase in the cost of producing oil in California, and submerging it into the world supply and crude oil prices, and measuring the cost increase on a global scale…
In their own article, they state that Californian oil scources meet 37% of the demand in California. Another 20-25% (?) comes from Alaskan scources, and the rest from foreign scources.
They further state that the Californian production will fall 22,000 bbls a day. (Presumedly from the refineries shopping elsewhere for the oil.) That’s what, 25% of the current production?
If the Alaskan oil fields had to take up that slack (plus whatever growth in demands due to population growth), why wouldn’t the producers charge more? (Assuming that the Alaskan fields can meet the demand.)
Doesn’t it cost more to ship oil to California from Alaska compared to, say, a field in Bakersfield? Why wouldn’t this cost get passed on?
Granted, I did not take statistics or major in economics, but it seems counter intuitive to me that the prices won’t get passed on.
“Big Oil” is made out to be Evil Incarnate. Why do you expect the rise in production cost to be borne by them, without passing it on to the consumer?
I would like to know how California compares to other oil producing states like Texas, Alaska and Oklahoma with regard to the percentage they take in royalties, taxes, etc. If California is below other oil producing states, they are leaving the people’s money on the table, and they have a duty to sell the citizen’s resources responsibly.
Other states do have what’s called a “severance tax” on oil taken out of the ground there, and California does not. When I first learned that that’s the case, I went from thinking I’d vote ‘No’ to thinking I’d vote ‘Yes’. Why shouldn’t Chevron et al have to pay California a severance tax just like they do everywhere else? Why are they bitching about having to pay the same tax in California that they already have to pay everywhere else? Lying, greedy thugs!
But then I read the article Voyager linked to above, which says (emphasis mine):
So do they not have to pay property and income tax in Alaska, Texas, etc.? Has California foregone the severance tax because we benefit from taxing the oil companies in other ways that equals or supercedes expected revenue from a severance tax? If that’s the case, now we’re trying to double-ding them. I’m back to ‘No’ again.
But then according to the “neutral expert” quoted by our friends over at factcheck.org (though somewhat out of context of the original quote, still factually related to the tax issue itself);
So I’m back to thinking “fair is fair.” Why shouldn’t they have to pay a severance tax for California oil just like they pay to every other state?
I’ve changed my mind on this thing so many times my head’s spinning like Regan from The Exorcist. At this point, all I can say is I agree with factcheck’s conclusion. . . With all the misinformation being spooned out in this fight, [if I can] manage to cast an informed vote [I’ll] do so in spite of this record-breaking TV blitz, and not because of it.
Let’s see here. We want to avoid gas prices rising. The reason gas is so cheap is other fuels are more expensive and less desirable, so we increase the price of gas to subsidize development or production of other fuels.
So, to avoid rising gas prices in the future, we raise them now. Only instead of the profit going to the producers, it goes to those that can’t compete on their own in the open market.
Except the market – that natural indicator and control of prices – is no longer able to work. Instead, we have substituted special interests controlling what the consumers pay.
I’m voting for it.