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Matthew Yi: Tax on big oil not likely to make a splash

3/11/2008

Sacramento -- Assembly Speaker Fabian Nunez, D-Los Angeles, wants to tax big oil to help fund education, which would take a $4 billion spending cut under Gov. Arnold Schwarzenegger's proposal for closing the state's big gap between revenues and expenses in the fiscal year that begins in July.

The speaker is planning Wednesday to introduce a bill in the Assembly Revenue and Taxation committee that seeks to raise $1.2 billion by imposing two new taxes: a 2 percent income tax on businesses that earn more than $10 million a year in the petroleum industry and a 6 percent severance tax on oil that's pumped in California.

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.

With the state facing fiscal crisis, raising additional taxes have been one of the key issues in the budget debate between Democrats who say California needs additional revenue and Republicans who argue the state needs to cut spending.

The state's budget deficit was expected to balloon to about $16 billion by July 1, but the Legislature and the governor were able to halve the gap by additional borrowing, delaying previously planned debt payments, withholding unspent education funds and deferring cost-of-living adjustments on some welfare payments.