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California and the West

'Excess Profits' Tax Urged on Oil Companies

Legislature: Atty. Gen. Lockyer says firms are gouging consumers with gas prices. Republicans again push to repeal sales tax on gas.


SACRAMENTO — Weighing in on one of the most contentious issues in the state Capitol, California Atty. Gen. Bill Lockyer advocated an "excess profits" tax on oil companies Tuesday before a special Assembly subcommittee examining the spike in gasoline prices.

"It feels like people are being gouged," Lockyer said. "It feels like people are being taken advantage of."

Lockyer also said the handful of oil refineries making the cleaner gas mandated by California legislators are abusing a petroleum shortage to jack up their share of gas prices, "simply because they can get away with it."

Lockyer's remarks came a week after the leader of the state Senate, Democrat John Burton of San Francisco, floated a similar "windfall profits tax" as a way to combat what he called "oil company greed."

Lockyer, who last year formed a task force to examine California's special vulnerability to gas price increases, added that he had spoken to Vice President Al Gore on Tuesday about the problem, and also favored solutions that attempted to lower prices by increasing free-market competition.

As gas prices have risen in California to an average of $1.74 a gallon--21 cents more than the nationwide average and 52 cents more than motorists were paying a year ago--so has political rhetoric in Sacramento.

Billed as an informational session, Tuesday's hearing quickly took on partisan overtones as Republicans used the opportunity to once again push their solution to the growing price problem--a permanent repeal of the state's sales tax on gasoline.

"We could immediately reduce by 15 cents the price that consumers pay at the pump," said Assemblyman Tom McClintock of Northridge, one of the cut's most fervent backers.

But Democrats did not use the special session to respond in kind by uniting behind Assembly Speaker Antonio Villaraigosa's rival proposal--partial suspension of the tax during the summer months. Villaraigosa did not take part in the session.

"We don't want to knee-jerk into taking action that is not warranted," said Assembly Transportation Committee Chairman Tom Torlakson (D-Antioch), discussing the reasons for holding the hearing with members of the Assembly Committee on Consumer Protection and the Assembly budget subcommittee on transportation.

Instead, many Democrats nodded in agreement as Severin Borenstein, a UC Berkeley professor and gas expert, debunked the tax cut as a misguided effort lacking a basic understanding of the economic forces contributing to the price hikes.

Killing California's gas tax, which varies from 7.25% to 8.5% depending on the county, may have some long-term effect on gas prices, Borenstein said. But it would not be as significant as some politicians seems to believe, he said, and would provide no relief at all for at least 90 days after it was enacted.

Borenstein went on to, in his own words, "pour cold water" over many of the proposals being discussed in the Legislature and on Lockyer's task force, of which he is a member. They include limiting the ability of refineries to own service stations and building a pipeline to the Gulf of Mexico to increase oil supplies.

"We do have to make sure there would be someone at the other end of the pipeline," he said.

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