Stand by for a dose of bad political theater today in Sacramento as the Democrats vote to increase what is already the nation’s highest gas tax by another $1.2 billion dollars. But it’s OK, as it’s “for the children.” As far as political drills go, this one is pretty spectacular. By law, preliminary school layoff notices have to go out over the weekend, so, the Democrats scheduled this vote to raise taxes on the oil industry to spend more on government education for the eve of the layoff notices. The Democrats’ proposal would levy a 6 percent tax on all oil produced within the state and impose a 2 percent tax on oil industry profits – none of which is supposed to be passed on to the consumer (a near impossible task). California produces 40 percent of its own oil and most of its own refined product (gas and diesel) and even refines almost 100 percent of Nevada’s fuel and about 60 percent of Arizona’s fuel. So, a 6 percent tax on California oil will mean that foreign oil, crude from places like Iran and Venezuela, will instantly have a 6 percent cost advantage on California oil (the U.S. Constitution prohibits California from taxing imports). With foreign oil cheaper, Californians will buy more of it, rendering us more dependent on foreign oil at a time when we should be becoming more independent of foreign oil while at the same time devastating California’s domestic oil production. Newspaper coverage of this political drill has been balanced. As the lead Republican in the Assembly on tax policy, I was quoted in five newspapers overnight:“It’s just bad political theater,” said Assemblyman Chuck DeVore, R-Irvine, vice chairman of the Revenue and Tax Committee. “If this bill ever made it into law, it would increase the cost of gas at the pump and . . . increase our reliance on foreign oil from places like Venezuela and Iran.” “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.“It’s bad political theater masquerading as responsible tax policy,” said Assemblyman Chuck DeVore, R-Irvine, the ranking Republican on the Assembly Revenue and Taxation Committee. “It’s actually bad fiscal and energy policy.”“This really is a drill,” said DeVore. “I wouldn’t want to insult the Democrats’ intelligence that they actually believe in the policies they’ve advocated. Clearly, these policies would devastate California’s domestic oil production.”DeVore said the proposal would “devastate oil production in California if it’s passed,” and would lead to an increase in Calfornia’s gas prices, despite language in the bill that specifically prohibits oil companies from passing the cost of the new tax on to consumers.

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.

The Assembly is expected to vote on the bill in the afternoon. But it’s unlikely the legislation will survive because a tax measure requires a two-thirds vote and Republicans refuse to support it, according to Assemblyman Chuck DeVore, R-Irvine, vice chairman of the Assembly Revenue and Taxation committee.DeVore today called the bill nothing but political theater on the part of the speaker by introducing a controversial bill just before the Legislature takes off for spring break.

Related Stories:

• Sacramento Bee
• San Jose Mercury News
• Capitol Weekly
• San Francisco Chronicle

The following appeared as an Op-Ed in the Orange County Register on December 18, 2007.

The Orange Grove: Health Plan pushes state to the brink 

With a $14 billion deficit, we can’t afford another huge social welfare program

By CHUCK DEVORE

Assemblyman Chuck DeVore (R-Irvine) is the Vice Chairman of the Assembly Committee on Revenue and Taxation.

“It’s an incredible plan,” said Assembly Speaker Fabian Nuñez, D-Los Angeles.

The speaker’s quote about the just-approved government health care he agreed to with Gov. Schwarzenegger unintentionally speaks volumes.

Incredible, as in farfetched, preposterous, hard to believe – call it what you will, the plan will cost far more than advertised and will drive businesses out of state, reducing state tax revenue and throwing people out of work.

Beginning with a low-ball $14 billion price tag, the plan to increase taxes on business, hospitals, and tobacco to provide health insurance to 3.6 million people will devastate an already unsteady economy. California’s budget already has a $14 billion hole in it, thanks to a complete lack of spending discipline and a housing boom gone bust. Adding massive new taxes and a massive new social welfare program will compound the problem and push California over the brink of financial disaster.

The Assembly approved the plan, 45-31, Monday afternoon. It needed only a simple majority to pass. The higher hurdle will be the tax increases to pay for the plan, which would have required a two-thirds approval and will force the Democrats and the governor to punt the tax hike to the people as a ballot initiative on next November’s ballot.

Gov. Schwarzenegger and Speaker Nuñez intend to pay for this big increase in government with three new taxes: a $2.3 billion tax on hospitals, a $1.50-per-pack tax increase on cigarettes and a new payroll tax on business. Many hospitals say they want the new tax as they expect to get more than that back in insurance reimbursements. The latter two taxes are more problematic.

Taxing tobacco is always popular in health-conscious California. The (happy) problem is that fewer and fewer Californians smoke every year. Some analysts are already expecting that the new tax would have to be set at $2 per pack to make up for a declining base of smokers and a higher loss of tax revenue because of increased tobacco smuggling.

The tobacco tax would be a mere annoyance compared with the havoc the payroll tax would wreak on business. The plan calls for small businesses with payrolls of up to $250,000, or under 10 employees for most California businesses, to spend at least 1 percent of payroll costs on worker health care or get hit with a payroll tax to fund a state-run health insurance pool. Firms with payrolls of up to $1 million would have to pay 4 percent, those with payrolls up to $15 million would have to pay 6 percent, and bigger companies would have to pay 6.5 percent.

Such a payroll tax and health care cost mandate will severely distort market forces. Small-business owners who already provide coverage will be encouraged to drop it in favor of the state-subsidized system. It will also cap business growth since an employer could see a large increase in payroll costs, with a commensurate drop in profit, as their labor costs crossed a key threshold at $250,000, $1 million or $15 million.

Thankfully, in addition to legislative Republicans, who have been left out of the dealing between Schwarzenegger and Nuñez, a voice of reason has emerged from an unlikely source: Senate President Pro Tem Don Perata, who has said he will delay a Senate vote on the plan until the governor explains how he will close the ballooning $14 billion deficit without hurting the poor and disabled with cuts to existing welfare programs.

Our challenge is not with access to health care, but rather with how to pay for it. Organizations on the left favor a total government takeover of health. At the other end of the political spectrum, legislative Republicans have repeatedly called for applying free-market principles to an over-regulated industry. Republican proposals include allowing out-of-state health insurers to compete in California, promoting health savings accounts (California is one of four states that taxes health savings accounts), and encouraging low-cost health clinics at retail chains as has been successful in other states.

California’s budget is collapsing under the twin pressures of unrestrained spending and a tax code that punishes the productive with the highest income tax rates in America. This cannot continue. We need to cut tax rates, not increase them. Government must live within our means to pay for it. To do anything else would be incredible.