Suspension of Gas Tax Faces Uphill Battle

Whether California drivers receive tax relief from surging gas prices in time for summer’s family road trips is developing into a contentious issue in the state capital, with the Legislature divided over its merits but Gov. Gray Davis indicating he is open to the idea.

Assembly Speaker Antonio Villaraigosa (D-Los Angeles), who responded to a Republican proposal to kill the state’s gas sales tax last week by floating a temporary partial suspension of the tax, has encountered opposition from powerful Senate President Pro Tem John Burton (D-San Francisco).

That opposition, which appears to be shared by many Democrats in the Assembly and Senate, threatens to quickly sink Villaraigosa’s plan. Assembly Democrats already have torpedoed a push by Republican Assembly members Tom McClintock of Northridge and Tony Strickland of Thousand Oaks to fast-track a vote to eliminate the tax, which varies from 7.25% to 8.5% depending on the county.

“It’s the oil companies doing what the oil companies do best: Screw the consumer,” Burton said of the gas crisis, which has raised the price for a gallon as high as $2 in some parts of the state. “I don’t think a tax cut solves the problem.”

But Davis, who initially said he considered rising gas prices a Washington concern, is now contemplating Sacramento solutions--a turnabout that could influence an outcome in the Legislature.

Though Davis’ official position on Villaraigosa’s bill, AB 43, remains “no position,” Davis spokesman Michael Bustamante acknowledged that the governor is increasingly looking for answers.

Since Davis discussed the gas hikes with President Clinton and Vice President Al Gore during a trip to Washington three weeks ago, “he has really taken the time to think about what could be done” in California, Bustamante said.

“At that time, the gas prices had not increased to the point they are at now. This is something that has been on his mind a lot.”

Gas prices in California have soared to an average of $1.74 a gallon, compared with $1.53 a gallon nationwide. That represents an increase of 52 cents per gallon from a year ago.

Villaraigosa remains confident that his carefully crafted tax cut will carry the day. It would only last from the beginning of June to the end of September, and it would only cut the state’s portion of the sales tax, which amounts to 5%. That would prevent the other beneficiaries of the tax, cities and local governments, from complaining.

Moreover, Villaraigosa’s proposal would use surplus money to “backfill” the amount the tax would siphon from state programs, ensuring that it pinches no one in Sacramento. The gas tax rakes in about $1.66 billion a year.

In his pursuit of his idea, however, Villaraigosa has ruffled some feathers in his own party. Some Democrats are angry that Villaraigosa did not inform them of his plans to respond to the Republicans’ tax cut proposal with one of his own, forcing them to learn about it in The Times.

Others say they consider his proposal politically foolish, because Republicans surely would push to permanently ban the tax when it was reinstated in October--placing Democrats on the defensive a month before the November election.

Villaraigosa, who is running for mayor of Los Angeles and is not facing reelection, dismissed both issues.

“I’m not worried about election-year politics,” he said. “This is about providing relief to motorists, who are feeling it at the pump.”

Villaraigosa said he expects Burton to change his mind once he learns more about his proposal. Burton, however, reaffirmed Wednesday that he strongly opposes Villaraigosa’s proposal.

He considers it misguided, arguing that the real culprit for the spike in gas prices was the “oil company greed and price gouging” that always rears its head when a shortage of petroleum occurs.

Any way Villaraigosa spins it, Burton said, the outcome is the same: The tax cut will reduce money that could be spent on roads, education, health care and other issues Californians care about. If the bill, which now is in the Senate, picks up any steam, Burton promised to tie it to a windfall tax on oil company profits.

Because the gas shortage is connected to a reduction in petroleum supplies to the United States, and is compounded by the relatively small number of refineries producing the cleaner version of gasoline mandated by California law, some economists and oil market experts have questioned whether motorists would reap any rewards from a tax cut.

They are not alone. Chris Walker, a lobbyist for the California Service Station Assn., which represents 850 gas station owners, said he recently informed their leaders about the gas tax cuts being proposed in Sacramento.

Their response: laughter.

“At best, this is a Band-Aid. At worst, it is a billion-dollar handout for the oil companies,” said Walker, adding that he met recently with Villaraigosa’s staff to share his concerns. “For a few hours, maybe a few days, the consumer would feel relief. But the oil companies will quickly move in to fill in the void.”