Proposition 87 in CA - Hollywood producer Stephen L. Bing. vs the oil companies
Posted in Environment, Politics by Klives
More than 107 million has been raised for and against this proposition, a state ballot initiative record.
The initiative would impose oil companies with a severance tax in CA. Depending on the price of a barrel of oil, the tax will range between 1.5% to 6.0% per barrel. This would be a new tax on extracting the oil form the ground. California is one of the only states that doesn’t impose a severance tax and CA is the third biggest producer of oil in the US behind Alaska and Texas. Alaskans don’t pay state income tax because they generate so much revenue from their severance tax.
4 billion dollars generated from this tax will be used for research for alternative energy. The state will spend about 400 million a year for ten years on research.
Clinton went to UCLA last week to endorse the measure. Gore already endorsed it. Surprisingly, Gov. Arnold Schwarzenegger has come out against it but is not campaigning against it.
Oil companies argue that landowners pay higher taxes and land with oil. If oil companies have to pay a severance tax, the land will be worth less money since the oil would be worth less money and the state would collect less property taxes. I’d say that this is a lame argument. A small decrease in property taxes may occur, but land with oil reserves is still going to be very valuable land and the decrease in property taxes is going to be very minor.
Oil companies argue that this tax will make the US more dependent on foreign oil since CA oil will become more expensive to produce. I say this is a lame argument too. It is probably going to cost a lot more to try to bring foreign oil to CA refineries than to pay this tax. The research on alternative energy to determine if/what kind of alternative energy can be used to has a lot more potential to lead to less dependence on foreign oil. The status quo policy isn’t working on decreasing our dependence.
Oil companies also say they already pay taxes because they pay income taxes like any other business. They argue that it isn’t fair that they should have to pay another tax. But if all the other states are imposing this tax, it seems fair that CA should be able to impose this tax.
Others say this will drive up the price of gas and this is a regressive tax. The old and poor will suffer. There is truth to this claim. Even though the measure says that oil companies cannot pass this tax on to consumers, I don’t see how this will be enforced. The cost of the old and poor paying more taxes may be counter balanced with the benefits if research does lead to a cleaner energy. Often poorer areas suffer the worst air pollution, so if a cleaner burning fuel could be developed, this could be seen as helping the poor the most. This is a bit of a leap but there is some truth to it.
The other argument, and probably the most convincing to people I talk to, is that this initive will create a huge beauracy that will waste all tax money collected. This may or may not be true. People really don’t like the idea of another bureacracy and really don’t trust the CA legislature to properly spend tax money.
Even if voters do approve it, it doesn’t mean it will go through. There was a ballot initiative in 2004 for the state to sell 3 billion worth of bonds to fund stem cell research. The state was supposed to spend 300 million a year. This measure has been in the courts for the last two years and little money has been spent as planned. I think there has been some breakthrough in the case lately but I’d have to research it. But the measure has been in the courts for years.
The bottom lines for me is that I’d rather pay a few more cents at the pump and have the state invest money into alternative energy research. I see this as a big and growing industry for the future and if CA can lead the market in this area, the state will be better off.
For more information and some details that haven’t been worked out
Much of my info came from
User: Klives
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Scan down the page for 10/13 - Questioning Prop. 87 sponsors: Chevron.
October 17th, 2006 at 9:30 am
There is good and bad here. The Good:
- This increases the costs of oil, encouraging people to find substitutes.
- Proceeds fund alternative energy research, job training, schools, and local government
- Supposedly it is illegal for the oil companies to pass along the cost to consumers
The Bad:
- Like Klives said, the cost will be passed on to consumers regardless of whether it is “illegal” or not. I have no idea how they plan on enforcing this rule.
- Oil companies are already advertising that this will raise the price of gas. If something raises the price of gas, it’s simply not going to get very much support from the public. I’d vote for it… but I’m not necessarily your “average” person when it comes to environmental issues.
Overall for society this sounds like a positive plan to me, however, I don’t think it’s going to get passed. The oil companies have too much money and they’re going to advertise way more than environmental groups… and with the threat of increased gas prices, self-interested consumers will vote against it. That’s just my prediction, however… we’ll see if things are different when prop 87 is voted on.
October 18th, 2006 at 12:12 am
It’s easy to say that George when you don’t live in california and have a bus system that sucks ass.
October 18th, 2006 at 9:06 am
Hey, I’ve voluntarily dealt with the Washington, DC Metro on my own free will two summers in a row. And I ride a bus to get to the metro. My commute takes anywhere from 1.25 hrs to 2+ EACH WAY, depending on how broken down Metro is on a given day.
I’m willing to make that sacrifice, but I’m willing to admit most people wouldn’t be too happy to do that, as I alluded to in my first comment.
Also, have you thought that perhaps money generated from prop 87 will probably in some way or another help out mass transportation issues?
October 18th, 2006 at 10:25 am
http://www.lao.ca.gov/ballot/2006/87_11_2006.htm
Allocation of Funds.
The funds generated from the severance tax, as well as any bonding against future severance tax revenues, would be allocated as follows, after first covering debt-service costs and expenses to collect the severance tax:
Gasoline and Diesel Use Reduction Account (57.50 Percent)for incentives (for example, consumer loans, grants, and subsidies) for the purchase of alternative fuel vehicles, incentives for producers to supply alternative fuels, incentives for the production of alternative fuel infrastructure (for example, fueling stations), and grants and loans for private research into alternative fuels and alternative fuel vehicles.
Research and Innovation Acceleration Account (26.75 Percent) for grants to California universities to improve the economic viability and accelerate the commercialization of renewable energy technologies and energy efficiency technologies.
Commercialization Acceleration Account (9.75 Percent)for incentives to fund the start-up costs and accelerate the production and distribution of petroleum reduction, renewable energy, energy efficiency, and alternative fuel technologies and products.
Public Education and Administration Account (3.50 Percent)for public education campaigns, oil market monitoring, and general administration. Of the 3.5 percent, at least 28.5 percent must be spent for public education, leaving a maximum of 71.5 percent of the 3.5 percent (or roughly 2.5 percent of total revenues) for the Authority?s administrative costs.
Vocational Training Account (2.50 Percent)for job training at community colleges to train students to work with new alternative energy technologies.