Assembly sets vote on Democratic plan to impose oil tax

The Assembly is expected to vote on an oil tax today that Democratic Speaker Fabian Núñez says will be the first of many revenue-raising proposals.

Núñez, a Los Angeles lawmaker with close ties to education unions, said he's trying to avoid devastating cuts as thousands of teachers receive preliminary layoff notices by the end of the week.

Republicans vowed to kill the proposal to divert some of the oil industry's profits. The bill requires Republican support to pass on a two-thirds vote.

"It's clearly a political drill that will devastate California's own oil production, and make us not only reliant on oil from out of state but out of the country," said Assemblyman Chuck DeVore, R-Irvine.

Núñez is proposing a two-pronged approach by levying a 6 percent tax on all oil produced within the state, and imposing a 2 percent tax on windfall oil profits. Together, the taxes would generate an estimated $1.2 billion a year for a cash-strapped state that still faces an $8 billion deficit for the fiscal year starting in July.

In an opinion piece published in today's Bee, Núñez says his proposal won't close the budget gap, but it will make "a big difference where it matters – our children's future." Under the speaker's bill, Assembly Bill X9, oil tax revenues would be dedicated for public education – a move that has been endorsed by the California Teachers Association, the state's largest teachers' union.

DeVore said the speaker timed his proposal close to Friday, the day when school districts must issue preliminary layoff notices to administrators and teachers, to drum up public support for taxes.

Since declaring his opposition to tax increases in January, Gov. Arnold Schwarzenegger has shifted his rhetoric, saying repeatedly that he is open to raising new revenues by eliminating or modifying some income tax breaks.

Last week, he went a step further and said sales tax "ought to be on the table."

Senate President Pro Tem Don Perata has suggested a combination of taxing services, lowering the personal income tax and temporarily raising the sales tax.

Under Núñez's proposal, the state would impose a 6 percent tax on all oil extracted from its land to generate an estimated $970 million in the next fiscal year. It would generate an additional $250 million by applying a 2 percent surcharge tax on oil companies that earn more than $10 million.

Núñez said his oil taxes would not hurt consumers. The bill prohibits the tax from being passed along to consumers by giving the state Board of Equalization the authority to investigate price gouging.

But Tupper Hull, a spokesman for the Western States Petroleum Association, said Californians have already rejected paying more. Voters in 2006 defeated Proposition 87, which would have imposed a per-barrel tax of up to 6 percent of the value of oil produced in the state.

"Consumers, ultimately, are very smart and they understand when products are taxed at certain rates, it has an effect on the marketplace," Hull said.

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