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Why California needs an oil tax

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FEBRUARY 08, 2013

Education is suffering. The economy is forcing too many people to rely on government assistance, and we are not doing enough to promote renewable energy.

We have a problem when California, the ninth largest economy in the world, has a 9.8 percent unemployment rate. Enrollment at California community colleges has dropped by 500,000 since prices began increasing in 2008. This is due to the doubling of unit costs for some of the lowest-income people in California. How can we expect people to get high-paying jobs if they can’t even afford to enroll in our community colleges?

One way we can start to heal California’s economy is with an oil severance tax. It is time Californians knew the truth about this tax. A severance tax is a tax on oil producers, not consumers. Oil interests have spent hundreds of millions of dollars over the course of decades turning this falsehood into truth in the minds of voters. The campaign for a California oil tax seeks to turn the spotlight on the numbers and facts about severance taxes.

First, we must ask ourselves why Alaska and Texas would implement a 25 percent severance tax and a 7.5 percent severance tax, respectively? After they passed these taxes, which raised substantial revenue, why didn’t their gas prices skyrocket? The answer is because oil is not a state, or even a national, commodity. Oil is a commodity bought and sold globally based on the supply and demand of the global market prices for oil. Because oil prices are mostly set on the global market, state severance taxes aren’t passed on to consumers.

Much of America’s diesel and oil comes from the Middle East. We buy from there because it is cheaper for us to do so, while we sell our oil to Europe and other parts of the world because they are the highest bidders. To re-emphasize the import and export dynamic of the global market: California extracts 349 billion cubic feet per year from natural gas wells. We import more than two trillion cubic feet of natural gas from other nations.

Now some may ask, and some have already asked, about the feasibility of an oil tax measure. After the passage of Proposition 30, voters may not want to pass new taxes like oil severance measures because they are incorrectly viewed as a tax on the people. But there are few measures more regressive than a sales tax, and voters passed that last November. On the other hand, a severance tax costs the consumer virtually nothing. The only reason people would reject an oil severance measure is if they were deceived about its effects.

Our vision is to reinvigorate California’s economy, lower the unemployment rate and, eventually, lower taxes across the board. We can use revenue from an oil severance tax to refund our priorities, such as education, infrastructure and green technology, while decreasing regressive taxes on the people in the long run. This would put more people to work and be a boon to California’s economy.

Our roads are crumbling. Tuition and fees are holding steady at $13,200 for the foreseeable future. Teachers laid off over the last few years remain laid off. Businesses wanting to expand can’t do so because of prohibitive costs. High fees at state parks are depriving lower-income families of the ability to visit. There are clear and present issues in our state that need to be fixed, and this measure is one of the best ways to do so.

This will not be resolved in the debate halls of our legislature but rather by the people, from whom all legitimate authority emanates. We are counting on the people of the state of California to pass the measure. Like our governor has stated, the people alone should have the right to decide on a tax increase, and the proponents of this initiative will fight to present it to them.

Harrison Tibbetts is the lead proponent of the California Modernization and Economic Development Act.

Contact the opinion desk at [email protected].

FEBRUARY 07, 2013