Don’t Tax Success

Since word came down from high during the last school year that the University of California and California State University systems would be especially hard-hit with the ailing state budget, leaders in the state and within the CSU and UC systems have been scrambling for answers. Assembly Majority Leader Alberto Torrico proposed AB 656, which will significantly tax oil company profits, to raise money for institutions of higher education in California. Torrico proposed the bill back in February, though with its recent approval of the Assembly Higher Education Committee, 5-3, the bill is gaining credibility in some circles. The bill is currently in committee. It is being touted by some as a brilliant solution to the budget crisis and its resulting affect on students in the state higher education system, but in reality it encourages anti-business practices.

On Thursday, November 19, the Regents of the University of California announced a plan to hike student fees by the significant margin of 32 percent. This unfortunate decision may in fact draw more popularity to AB 656, which seeks to throw the responsibility of education onto the unrelated oil industry. According to Alberto’s personal web site, “AB 656 reverses this trend” by putting a “severance tax on big oil companies, who have raked in record billion-dollar profits,” and instead awards the money to California colleges. So long as we’re taxing oil companies, why not tax fast food joints and hair salons? They also enjoy profits and aren’t seen as being as “important” as educational institutions. Torrico further claims that his bill “will provide the financial support our universities and community colleges need to serve all students looking to expand their education, retrain for new jobs, or to enter the workforce for the first time.” The best thing about this bill is the way in which its true goal is obfuscated: AB 656 is just a cleverly disguised way to tax one form of business, and not just to help students.

If passed, AB 656 would establish the California Higher Education Endowment Corporation, or CHEEC, which would “annually allocate an unspecified percentage of the moneys… [from] the California Higher Education Fund, which would be created in the General Fund, to the California community colleges for curriculum and programs related to renewable energy and to annually allocate remaining moneys in the fund to the California State University and the University of California.” This is a hidden way to obtain money mainly for renewable energy studies, giving the leftovers to students in the CSU and UC systems. Of course, the bill itself is couched in terms of how it will fix the problems of the CSU and UC systems, when in fact, that is not its primary aim at all.

If passed, AB 656’s “oil and gas severance tax” would go into effect within two months, on January 1, 2010. In essence, oil and gas producers are being taxed so that Torrico’s pet projects can be funded, and students believe the bill is in place mainly to help them. Can we say obfuscation? And because the bill would label the taxes as lawful levies, Torrico’s bill also states that the gas and oil companies will not be reimbursed for the paid levies, “penalties, and interest collected pursuant to these provisions.”

One can’t help but be reminded of President Obama’s elusive tax message: we aren’t taxing success (the middle class), when in fact, that is exactly what is happening, and is the reason that businesses leave California in search of cheaper locations from which to operate. Why are the gas and oil industries suddenly burdened with saving the state universities? They aren’t the ones who drove a top-notch education system into the ground. Why are oil companies seen as soft targets, as scapegoats for a legislature that has long mishandled the finances of a state which should be in the red, not the black? Oil and gas companies should not be forced to pay for the mistakes of state and university leaders… and if they are, the legislators should at least be honest about their intentions.