June 16, 2009
The oil companies do not get huge tax breaks on oil production in California; they do pay taxes at rates comparable to other states, just in different forms. They pay higher property, corporate income, and other taxes than in other states that impose oil severance taxes (or “drilling taxes”). A Spring 2006 study by LECG found that the aggregate amount of taxes currently paid on California crude oil production is comparable to that paid in other oil-producing states. Califonia ranks right about in the middle of the pack for taxes imposed in oil producing states.
With the imposition of the new tax called for in Proposition 87, the tax would have been more than 30 percent higher in California. The specifics of the new proposal to impose a severance tax are awaiting disclosure, but will likely be somewhat similar to that posed in Proposition 87, at least in structure if not severity.
The analysis colleague Amy Kaleita and I provided back in 2006, is still pertinent: it is simply NOT true that California gives oil companies a “pass” as suggested in the editorial by Hiltzik.