California Assembly Committee Approves Oil Tax Bill

Let the war over tax hikes begin.

And score the first battle Democrats yes, Republicans no -- just like last year.

Legislation to impose a new severance tax on oil and natural gas extraction to help bolster higher education funding passed the Assembly's Revenue and Taxation Committee by a party-line vote Monday.

The action came just three days after Gov. Arnold Schwarzenegger released a new state budget plan relying largely on spending cuts and hoped-for federal revenue to bridge a projected $19.9 billion shortfall by July 2011.

Democrats, by their committee vote, signaled a willingness to press for targeted tax increases, even though 2010 is an election year and odds are slim of winning the necessary two-thirds legislative super-majority to pass such measures.

"It's up to Republicans if they want to move this state forward," said Assemblyman Alberto Torrico, D-Newark, who is renewing his push for the oil severance tax after it hit a roadblock last year.

Assemblyman Chuck DeVore, an Irvine Republican who like most GOP lawmakers has signed a national no-new-taxes pledge, said he expects Torrico's Assembly Bill 656 will be the first in a long line of Democratic revenue-raising measures.

"This is going to be a very long year of one tax proposal after another," DeVore said.

Another controversial revenue-raising measure, Assembly Bill 390 to regulate and tax the sale of recreational marijuana, is scheduled to be heard today by the Assembly Public Safety Committee.

Torrico's oil severance tax would generate an estimated $1.3 billion annually for community colleges, state universities and University of California campuses by imposing a 12.5 percent tax on the gross value of oil and natural gas extracted from California.

AB 656 contains a provision prohibiting the new tax from being passed to consumers.

Supporters argue the measure is urgently needed to stem a growing tide of canceled classes and skyrocketing college fees. Opponents counter that targeting a single industry is unfair and would force layoffs that ultimately would reduce state and local tax revenue.

AB 656 now goes to the Assembly Appropriations Committee.

A competing bill, Assembly Bill 1604, would impose a 10 percent oil extraction tax to boost the state's general fund.

Copyright (c) 2010, The Sacramento Bee, Calif. Distributed by McClatchy-Tribune Information Services.