California Assembly kills Núñez oil tax plan

With gasoline prices soaring, legislation to slap the oil industry with higher taxes died in the Assembly late Wednesday in the latest party-line battle over the state's beleaguered budget.

Republicans killed the two-pronged oil tax proposed by Assembly Speaker Fabian Núñez, which they considered a threat to the state's economy as well as political gamesmanship meant more for public relations than problem solving.

In turn, Núñez said at a news conference before the vote that the GOP could not continue to push "knee-jerk, no-tax rhetoric" without coming to grips with its effect on schools and other public services.

"We're going to keep putting (revenue proposals) up for a vote until such time as the voting public knows very clearly, and can distinguish, between those that stand with them and those that are totally out of touch," Núñez said.

Núñez's proposal, Assembly Bill X3 9, would have levied a 6 percent tax on all oil produced within the state. It also would have imposed a 2 percent "windfall profits" tax on oil companies that earn more than $10 million.

Wednesday's vote came on the heels of a similar skirmish in which Republicans killed a proposal to close a sales and use tax loophole on the purchase of luxury boats, recreational vehicles and planes.

Assemblyman Chuck DeVore, R-Irvine, said the proposed oil taxes made it clear that Democrats plan to deflect attention from excessive spending by portraying the GOP as obstructionist.

DeVore predicted that Democrats next would try to hike taxes on alcohol or tobacco, then income taxes on high earners.

"They're going to use the tax issue of the week as a battering ram to attempt to weaken Republican resolve to get some spending discipline in Sacramento," DeVore said.

Dan Schnur, a GOP strategist, said Democrats pressed their case for long-term revenue increases Wednesday with a bill that could have sparked a short-term backlash from drivers facing high gasoline prices and wary of new oil taxes.

"It gives the Democrats an opening salvo in what is probably going to be a whole series of proposals of various kinds of tax increases," Schnur said.

Núñez's legislation was unveiled just one day before the vote, allowing little time for public debate.

It required a two-thirds majority for passage, meaning it needed 54 votes for passage. It failed on a 45-30 vote, with no Republicans supporting it.

The two taxes would have generated an estimated $1.2 billion annually for California schools in an attempt to assist the cash-strapped state, whose projected budget deficit was trimmed recently but remains at $8 billion.

Gov. Arnold Schwarzenegger would not sign Núñez's bill, spokesman Aaron McLear said.

"The governor does not believe that raising taxes is the solution for our chronic budget problems," McLear said. "He believes we need budget reform so we don't go through this roller-coaster ride every single year of not knowing how much (money) we're going to have."

Núñez said the oil taxes would have forced an industry making enormous profits to pay its "fair share" to California.

And as for partisan fighting over the proposal, he said, "People have an opportunity here to define themselves – to define who they are, who they stand with, and what they stand for."

The measure would have prohibited the tax from being passed along to consumers and authorized the Board of Equalization to investigate price gouging.

Critics said oil companies simply would find a back-door way to sock motorists.

Wednesday's vote came as school districts throughout California are notifying some teachers that they might be laid off next year if the state follows through on plans to reduce funding for public schools and community colleges by $4.8 billion.

Garry South, a Democratic strategist, said Núñez's bill conceivably could help Democratic legislative candidates in contested districts this November, even though it failed.

"My guess is that what the Democrats are trying to do is put more (Republicans) afoul of the public, or at least public perception, that they're trying to protect major monied interests when the state is in serious financial difficulty," South said.

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