Now is not the right time to push for the passage of a state oil severance tax. Certainly, a conversation about the issue is warranted — California is the fourth-largest oil producer in the country and one of the only such states without a severance tax. But passing the tax is not a politically feasible accomplishment at the moment.
Californians for Responsible Economic Development, a UC Berkeley student-run committee, is misguided in its attempt to tap into the success of Proposition 30 to advance a potential 9.5 percent severance tax on oil and natural gas produced in the state. The group fails to fully recognize that the passage of Prop. 30 was a unique feat that will be incredibly difficult to replicate.
It’s simply too soon to ask California voters, notoriously reticent to raise taxes, for another tax increase. And Prop. 30, which asked voters to approve increases in sales and income taxes to circumvent dramatic budget cuts, was more an example of successful campaign rhetoric than a signal that voters are suddenly more receptive to raising taxes. More importantly, supporters of an oil severance tax do not have an analagous set of circumstances on which to build their case to either voters or state legislators.
One major reason Prop. 30 succeeded was the imminent threat of budgetary evisceration to crucial institutions like the University of California. Voters approved the measure to save those institutions. Students campaigned for it to prevent further tuition increases. An oil tax, on the other hand, relies on a more ideological argument. To succeed, voters or legislators would need to be convinced that oil companies deserve a tax in order to generate as much as $2.5 billion for education and local government. The stakes are not nearly as high as they were for Prop. 30.
In voters’ minds, Prop. 30 was also necessary because the state Legislature had failed to adequately solve a statewide funding crisis. The same is not true for an oil tax. Moreover, the actual taxes involved with Prop. 30 were more digestible — as opposed to the complexity surrounding the implications of a potential oil severance tax — making it an easier choice for voters to make.
Yes, the oil tax the group is advocating for would apply to oil producers, not the average resident. But as campus public policy professor John Ellwood suggested, voters may not be immune from feeling the weight of the tax. What would stop oil companies from passing the cost on to consumers? With gas prices in California unreasonably high, the threat of paying more at the pump would be a very persuasive disincentive.
The tax is most likely doomed in any avenue. But if the group is truly serious about getting an oil tax passed, it should first direct its efforts toward the state Legislature, which theoretically has the expertise to make this decision on behalf of its constituents. Then, if that avenue is fruitless and Prop. 30 is not as recent, it can make its best case to the voters.