# Prop. 87 (CA): New taxes on oil companies **URL:** \ **Category:** In My Humble Opinion\ **Created:** [August 15, 2006, 1:26pm UTC](https://boards.straightdope.com/t/prop-87-ca-new-taxes-on-oil-companies/368819 "2006-08-15T13:26:58Z")\ **Posts on this page:** 15\ **Page:** 1
**Author:** ![Johnny\_L.A](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/johnny_l.a/32/1084_2.png) [@Johnny\_L.A](https://boards.straightdope.com/u/Johnny_L.A)\ **Post date:** [August 15, 2006, 1:26pm UTC](https://boards.straightdope.com/t/prop-87-ca-new-taxes-on-oil-companies/368819/1 "2006-08-15T13:26:58Z")
I’ve seen two ads about California Proposition 87, one for and one against. The estimated $4 billion revenue would be used to provide loans, grants, and other incentives to buy alternative-fuel vehicles, and to fund research to develop alternative energies. The ‘pro’ ad says that oil companies made $78 billion dollars in profits, and that it’s time for them to pay their fair share. The ‘con’ ad features a woman filling up her vehicle (I don’t remember what kind) and claiming that the tax would fund a ‘new alternative energy bureaucracy with no accountability to taxpayers’. (ISTR that oil companies argue that they’re record profits are necessary to fund more exploration for oil, investigation into alternative energies, and to maintain and upgrade the existing infrastructure. We can see how well those profits have been used by BP’s stellar maintenance of their Alaska pipeline.) For me this is academic. As a legal resident of Washington, I can’t vote in California. But what do you think of Prop. 87? ---
**Author:** ![if6was9](https://avatars.discourse-cdn.com/v4/letter/i/e47c2d/32.png) [@if6was9](https://boards.straightdope.com/u/if6was9)\ **Post date:** [August 15, 2006, 5:04pm UTC](https://boards.straightdope.com/t/prop-87-ca-new-taxes-on-oil-companies/368819/2 "2006-08-15T17:04:59Z")
Regardless of where the money goes, or whether or not that has an impact, Big Oil will just pass the tax to the consumer. ---
**Author:** ![iamthewalrus\_3](https://avatars.discourse-cdn.com/v4/letter/i/258eb7/32.png) [@iamthewalrus\_3](https://boards.straightdope.com/u/iamthewalrus_3)\ **Post date:** [August 15, 2006, 6:59pm UTC](https://boards.straightdope.com/t/prop-87-ca-new-taxes-on-oil-companies/368819/3 "2006-08-15T18:59:35Z")
[QUOTE=if6was9] Regardless of where the money goes, or whether or not that has an impact, Big Oil will just pass the tax to the consumer. [/QUOTE] But, it says right in the text that they will be prohibited from doing so. :rolleyes: In general, I’m opposed to initiatives because the law of unintended consequences tends to bite back especially hard. In this case, I’m hesitant to vote for economic changes written either by or for people who demonstrate a lack of basic economics knowledge. I am in favor of increased taxes on gasoline, in the hopes that we can provide an incentive to switch to other fuels before the crunch is really on. However, I don’t think that providing direct monetary incentives for alternate fuels tech is a good way to go about it. I could easily see that subsidizing someone’s Prius (quick, there’s excessive demand for this car. Let’s give everyone a tax credit for buying one!) or, even worse, someone’s ridiculous hybrid SUV (Hummer hybrid: Breaking the 10 mpg barrier!). ---
**Author:** ![Airman\_Doors\_USAF](https://avatars.discourse-cdn.com/v4/letter/a/e36b37/32.png) [@Airman\_Doors\_USAF](https://boards.straightdope.com/u/Airman_Doors_USAF)\ **Post date:** [August 15, 2006, 9:34pm UTC](https://boards.straightdope.com/t/prop-87-ca-new-taxes-on-oil-companies/368819/4 "2006-08-15T21:34:13Z")
Typically ridiculous Robin Hood-type bill. When someone has more you snatch at it every chance you get simply because you can. If people want communism, let 'em have it. We’ll see how long it takes for them to change their minds. I give the experiment until the first payday. ---
**Author:** ![Syntropy](https://avatars.discourse-cdn.com/v4/letter/s/65b543/32.png) [@Syntropy](https://boards.straightdope.com/u/Syntropy)\ **Post date:** [August 15, 2006, 9:45pm UTC](https://boards.straightdope.com/t/prop-87-ca-new-taxes-on-oil-companies/368819/5 "2006-08-15T21:45:49Z")
Yes, silly to take money from the people who actually have it and invest it in alternative technology. You do things that way, you end up with a state with a globally competetive economy. Who wants that? ---
**Author:** ![Syntropy](https://avatars.discourse-cdn.com/v4/letter/s/65b543/32.png) [@Syntropy](https://boards.straightdope.com/u/Syntropy)\ **Post date:** [August 15, 2006, 10:00pm UTC](https://boards.straightdope.com/t/prop-87-ca-new-taxes-on-oil-companies/368819/6 "2006-08-15T22:00:17Z")
[QUOTE=Airman Doors, USAF] Typically ridiculous Robin Hood-type bill. When someone has more you snatch at it every chance you get simply because you can. If people want communism, let 'em have it. We’ll see how long it takes for them to change their minds. I give the experiment until the first payday. [/QUOTE] After a little research I found this: > [@](#): > > Proposition 87, the Clean Alternative Energy Program, would set drilling fees to be comparable to those in Oklahoma, Alaska, and Texas. Can you give me any reason as to why you feel setting those rates at a comparable level to what’s charged in other states is “snatching money simply because you can”? Competitve market swings both ways. ---
**Author:** ![hajario](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hajario/32/171_2.png) [@hajario](https://boards.straightdope.com/u/hajario)\ **Post date:** [August 15, 2006, 11:22pm UTC](https://boards.straightdope.com/t/prop-87-ca-new-taxes-on-oil-companies/368819/7 "2006-08-15T23:22:47Z")
Here is the brief explanation of Prop. 87 from the Secretary of State’s website: > [@](#): > > Establishes $4 billion program to reduce oil and gasoline usage 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 on to consumers. Program administered by California Energy Alternatives Program Authority. Prohibits changing tax while indebtedness remains. Revenues excluded from Proposition 98 calculations and appropriation limits. Summary of estimate by Legislative Analyst and Director of Finance of fiscal impact on state and local governments: New state revenues annually – depending on the interpretation of the measure’s tax rate provisions – of either about $200 million or about $380 million from the imposition of a severance tax on oil production, to be used to fund a variety of new alternative energy programs. Reductions of unknown amounts in: local revenues from property taxes paid on oil reserves, potentially partially offset by state payments to schools to make up their revenue loss; state revenues from income taxes paid by oil producers; and, potentially, state and local revenues from gasoline and diesel excise and sales taxes. Here is a pdf of the entire text: [http://www.caag.state.ca.us/initiatives/pdf/sa2005rf0138\_2-s.pdf](http://www.caag.state.ca.us/initiatives/pdf/sa2005rf0138_2-s.pdf) ---
**Author:** ![Airman\_Doors\_USAF](https://avatars.discourse-cdn.com/v4/letter/a/e36b37/32.png) [@Airman\_Doors\_USAF](https://boards.straightdope.com/u/Airman_Doors_USAF)\ **Post date:** [August 15, 2006, 11:26pm UTC](https://boards.straightdope.com/t/prop-87-ca-new-taxes-on-oil-companies/368819/8 "2006-08-15T23:26:06Z")
[QUOTE=Maureen] After a little research I found this: Can you give me any reason as to why you feel setting those rates at a comparable level to what’s charged in other states is “snatching money simply because you can”? Competitve market swings both ways. [/QUOTE] Those other states are money grabbers, too. “Windfall” taxes are nothing of the sort. They’re money grabs. Are those taxes going to be reduced when the companies in question inevitably earn less? Fat chance. Moreover, why do you think companies should have their profits taken from them when somebody decides that they make “too much”? Can I have some of your money? You make more than I do, therefore in my opinion you make too much and I want my cut. ---
**Author:** ![Syntropy](https://avatars.discourse-cdn.com/v4/letter/s/65b543/32.png) [@Syntropy](https://boards.straightdope.com/u/Syntropy)\ **Post date:** [August 15, 2006, 11:38pm UTC](https://boards.straightdope.com/t/prop-87-ca-new-taxes-on-oil-companies/368819/9 "2006-08-15T23:38:39Z")
I’m not sure I see your point. The competetive markets in other states charge a certain amount; California charges less and pays more. It makes good business sense that in order to stay competetive, they charge current market value. Are they going to lower their rates because I can’t afford what their other customers pay? Let us not be silly. My skepticism lays elsewhere as far as the tax goes. I have no problem with the reason stated for the it; if it actually works out that way. Researching alternative fuel sources is something we should have been doing for the past twenty years. But I’m not sure that’s where the money will actually go. California’s tax money comes from the general fund. All lumped in and budgeted out. And of course, we only mismanage our budget every _single_ damn year. So shortfalls from one project are paid from the general fund and something else is shorted, something else gets overpaid, another project gets halted til the budget can catch up…freakin mess. ---
**Author:** ![treis](https://avatars.discourse-cdn.com/v4/letter/t/bc79bd/32.png) [@treis](https://boards.straightdope.com/u/treis)\ **Post date:** [August 16, 2006, 1:41am UTC](https://boards.straightdope.com/t/prop-87-ca-new-taxes-on-oil-companies/368819/10 "2006-08-16T01:41:42Z")
[QUOTE=if6was9] Regardless of where the money goes, or whether or not that has an impact, Big Oil will just pass the tax to the consumer. [/QUOTE] Why hasn’t Big Oil raised their prices already to make more money if they can do it as easily as you say. ---
**Author:** ![if6was9](https://avatars.discourse-cdn.com/v4/letter/i/e47c2d/32.png) [@if6was9](https://boards.straightdope.com/u/if6was9)\ **Post date:** [August 16, 2006, 6:27am UTC](https://boards.straightdope.com/t/prop-87-ca-new-taxes-on-oil-companies/368819/11 "2006-08-16T06:27:24Z")
[QUOTE=treis] Why hasn’t Big Oil raised their prices already to make more money if they can do it as easily as you say. [/QUOTE] You’re saying that every single price increase (seemingly every other day nowadays…) is for purely economical reasons? They had no choice? Never slipped one penny in there because they just felt like it? Who’s naive now? ---
**Author:** ![treis](https://avatars.discourse-cdn.com/v4/letter/t/bc79bd/32.png) [@treis](https://boards.straightdope.com/u/treis)\ **Post date:** [August 16, 2006, 7:41am UTC](https://boards.straightdope.com/t/prop-87-ca-new-taxes-on-oil-companies/368819/12 "2006-08-16T07:41:16Z")
[QUOTE=if6was9] You’re saying that every single price increase (seemingly every other day nowadays…) is for purely economical reasons? They had no choice? Never slipped one penny in there because they just felt like it? Who’s naive now? [/QUOTE] I think it’s still you. Why wouldn’t the oil companies always price their gas to maximize their profits? In other words, why wouldn’t they slip pennies in every chance they get. ---
**Author:** ![JohnT](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/johnt/32/15048_2.png) [@JohnT](https://boards.straightdope.com/u/JohnT)\ **Post date:** [August 16, 2006, 3:19pm UTC](https://boards.straightdope.com/t/prop-87-ca-new-taxes-on-oil-companies/368819/13 "2006-08-16T15:19:47Z")
[QUOTE=Maureen] Yes, silly to take money from the people who actually have it and invest it in alternative technology. You do things that way, you end up with a state with a globally competetive economy. Who wants that? [/QUOTE] California isn’t competitive globally? Who knew? 😕 ---
**Author:** ![Precambrianmollusc](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/precambrianmollusc/32/63_2.png) [@Precambrianmollusc](https://boards.straightdope.com/u/Precambrianmollusc)\ **Post date:** [August 16, 2006, 5:52pm UTC](https://boards.straightdope.com/t/prop-87-ca-new-taxes-on-oil-companies/368819/14 "2006-08-16T17:52:12Z")
I don’t quite follow how taxing oil production will lead to a decrease of 25% in oil and gasoline demand. The users will see no difference in price, if the clause not allowing the tax to be passed through to the consumer is workable, and thus no reason to reduce consumption or switch to an alternate. The subsidied alternates may provide some incentive. Why not just tax the consumer through petrol duty and pass those tax revenue bucks (comments above on the way california taxs are handled notwithstanding) to subsidies alternate uses and, god forbid, build some decent public transport infrastructure. Thus the user see a doubling effect , their curent fuel price is higher than starting point and the alternate is lower than its starting point thus the consumer demand to switch fuel source and reduce consumption is enhanced. On the sneeking in here and there of a penny increase in petrol prices just because they can, I doubt this is the case. The usual volume sales driven profit margin and requirements for cash flow have in the past demonstarted that one petrol station is always prepared not to pass on that 1c rise and thus get a little more business and a few morepeople buying items in the gas station store at a healthy markup. It would require a coordinated approach to raise the price, which is possibly illegal and difficult to implement as it is my understanding many petrol station out lets are run as a franchise and as such , big oil HQ cannot exert direct pricing over the outlets. Add to that, it is my experience that the oil majors really trust each other less than two people or organisation who don’t trust each other a whole heap, coordination in priceing for petrol, unlikely. As for taxing the production of oil at a higher rate based on the price per bbl, no reason not to do so, it’s the states and california voters rights to set what ever business financial regime they see fit to do so. I would wonder if the tax would really be effective as it would not be a huge issue for companies (barring small independents) to switch investment in production (approx 260 million bbls produced total 2005) and drilling operations to other states or outside the country thus lowering the production in state (or not letting it increase as may be required). The prooven reserves stay in the ground in Californa thus not affecting the oil co valuation, oil is produced elsewhere, petrol is sold, the great big cash register continues to ring. On the political adverts (I have not seen any, just going on the OP example) it may be a little disingenuous to suggest that ‘it is time for oil co to start paying their share’. The 78billion are profits on worldwide income, so royalties, taxes national petroleum fund contributions etc have all been paid in the respective countries where oil was produed or petrol/petrochemical prodcut sold. If the 78billion is post tax then the US protion of tax has also already been paid as well, all of which is a chunk of change some share as been made, but it never hurts to ask for a bit more I suppose. Incidentally at current prodcution rates in california and assuming 70$ a bbl and 6% tax on gross cost that 1billion a year, I assume the 4 billion is across several years. As for oil cos claiming they need the money for new exploration, i would imagine that they have sunk as much money as they can into their exploration budgets now to get as much cash out of the profit line as possible. Many countries allow a tax break on cost associated with exploration, so better to use this up than have it appear as profit andlet terry the tax man have a bigger nibble. Anyone still here? In short - dont see the tax doing anything to drive down petrol demand, it may well drive down oil production in california. Anything in a political advertising is very likely to be a mild exageration and a possible misrepresentation, you don’t say… ---
**Author:** ![rjung](https://avatars.discourse-cdn.com/v4/letter/r/45deac/32.png) [@rjung](https://boards.straightdope.com/u/rjung)\ **Post date:** [August 16, 2006, 7:41pm UTC](https://boards.straightdope.com/t/prop-87-ca-new-taxes-on-oil-companies/368819/15 "2006-08-16T19:41:30Z")
I haven’t read the details of the proposition in-depth yet, but I’m working on the assumption that the anti-87 crowd is backed by the oil industries. [Surprise, surprise.](http://thinkprogress.org/2006/08/09/oil-ca/)