‘Excess Profits’ Tax on Oil Firms Rejected by Panel

A Democrat-generated proposal to levy a new tax on oil companies for their high gas prices--and lower prices at the pump by 10 cents a gallon--ran into Republican opposition and was defeated Monday in an Assembly committee.

Billed as potential relief for motorists, a bill whose backers accused the industry of price gouging failed to survive its first lower-house hearing.

The measure by Democratic Sens. Mike Thompson of St. Helena and Daniel E. Boatwright of Concord was voted down when it mustered only two votes in favor and six against. The vote in the Assembly Revenue and Taxation Committee makes it unlikely that the measure will advance. It would have removed a 6% sales tax on gasoline and recouped the $1.3-billion-a-year loss to the state by slapping an “excess profits” tax on oil companies.

Also removing impetus for the measure, gas prices have been coming down recently without a boost from lawmakers.

The statewide average of $1.153 a gallon in early February had risen to $1.545 by early May, according to the U.S. Energy Information Administration. But this week the agency said the California average had dipped to $1.498 a gallon.

Thompson said the bill was prompted by a Senate hearing on the high gas prices and testimony from oil industry representatives who, he said, were unable to justify the almost 40-cent leap in vehicle fuel prices this spring.

Industry witnesses, Thompson said, could account for only half of the increase as being related to added costs. The rest, he said, was simply “what the market will bear” and imposed by a “virtual monopoly” industry.

But Assemblyman Howard Kaloogian (R-Carlsbad) asked, “What’s wrong with that?” Market forces determine the price of nearly everything, he said.

Other Republicans objected on grounds the tax increase simply would be passed on to the public, although Thompson said his bill would have prevented it. Republicans also said there was no evidence the oil companies were violating antitrust laws.

Several lawmakers on the committee have received significant contributions from the petroleum industry since 1993, state records show, led by the committee chairman, Assemblyman Nao Takasugi (R-Oxnard) with $15,850, and Louis Caldera (D-Los Angeles), who has received $15,250.