As California experiences an historic surge in gas prices, Gov. Gavin Newsom on Friday proposed a new tax on oil companies that would fund rebates for Golden State taxpayers getting squeezed at the pump.
Newsom said in a statement that he was working with members of the California legislature to charge a windfall profit tax on companies engaged in the extraction, production and refining of oil.
Under the proposal, the companies would pay a higher tax rate on their earnings above a set amount each year. The funds collected would then be directed to California taxpayers in the form of rebates or refunds, the statement said.
“Crude oil prices are down but oil and gas companies have jacked up prices at the pump in California. This doesn’t add up,” Newsom said in a release. “We’re not going to stand by while greedy oil companies fleece Californians.”
The governor did not hold a news conference about the proposal so many questions remain unanswered, including his timeline for implementation, what the earnings threshold would be for companies and how the rebates would be distributed. It is also unclear what actions the California Department of Justice is taking to investigate companies for market manipulation or price gouging.
In a statement, California Attorney General Rob Bonate said that his office is “monitoring the market closely, and we will not hesitate to take action if we find evidence that the law is being violated.”
The announcement came just hours after Newsom directed the California Air Resources Board to “take whatever steps are necessary” to permit refineries to begin making and distributing winter-blend gasoline, which is easier to make and cheaper for consumers.
As of Friday, California’s price at the pump is an average $6.29 — more than $2 above the national average of $3.80, according to data from AAA. While the price of crude oil has declined, California’s cost-per-gallon has risen by a record 84 cents in the last 10 days.
Some of that disparity can be attributed to the Golden State’s 54-cent gasoline excise tax, which is the second-highest in the country, and the state’s rigid environmental regulations. But Newsom said oil companies have “failed to provide” a complete explanation for the unprecedented divergence between California’s price at the pump and those in other parts of the country.
The California Energy Commission on Friday sent a letter to refinery executives at Chevron, Marathon Petroleum, PBF Energy, Phillips 66 and Valero to request comprehensive explanations for the recent spike in prices.
Legislatures quickly weighed in both in support — and in opposition — of Newsom’s tax proposal.
Assemblymember Alex Lee (D-San José) wrote on Twitter, “glad (Gavin Newsom and I agree: Fossil Fuel Corporations are ripping us off and it’s time we redistributed their profits to the people.” Lee unveiled a similar proposal earlier this legislative session.
Assemblywoman Laurie Davies (R-San Juan Capistrano), meanwhile, took issue with the governor levying even more taxes in tax-heavy California.
“Better Idea: How about we immediately suspend the state’s gas tax?” she wrote on Twitter. “We pay close to $2 more for gas than any other state because of our regulations + taxes. We don’t need more!”
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