Calif. Democrats propose oil tax to balance budget

File photo of the capitol building in Sacramento, Calif.
File photo of the capitol building in Sacramento, Calif. Getty Images

State Assembly Democrats say they can solve California’s $19 billion deficit with no cuts to health, welfare education or public safety.

Democrats propose to do that with a new tax on oil companies — and some fancy financial footwork.

The Assembly Democrats' budget proposal might just be the most creative sleight of hand Sacramento’s ever whipped up.

The chair of the Assembly Budget Committee Bob Blumenfield (D-San Fernando Valley) called it something else:

“This is a paradigm shift” Blumenfield said. “It is not just a budget proposal.”

Blumenfield says the plan avoids big borrowing and deep cuts to state programs — but still manages to generate more than $10 billion to plug the budget deficit.

Assembly Speaker John Perez (D-LA) says $8.7 billion will come from a plan to charge oil companies a severance tax. Another $2 billion would come from striking down recently enacted tax breaks.

“We’re not imposing any broad-based tax increases.” Perez said. “We’re instead bringing California in line with the national standard for oil companies and repealing corporate tax loopholes that were written in the secret backroom deals in the dead of night last year.”

Sounds simple, but it’s not.

New taxes — like the oil severance tax the Democrats propose — require a two-thirds vote in the legislature. That means some Republican lawmakers would have to vote for the tax — and they won’t do that.

To get around the need for Republican votes, the Democrats would borrow against the future revenues of the Beverage Recycling Fund — the extra pennies you pay for bottles and cans. They’d pay back the loan with the new tax on oil companies. That tax would be neutralized by a cut in the state sales tax — but local sales taxes would go up so you’d pay the same as you do now.

None of that requires a two-thirds vote, but it does require the governor’s signature.

Aaron McLear, the governor’s press secretary, calls it “legal gymnastics.”

In a written statement, McLear says the governor won’t sign a budget unless it includes “budget and pension reforms without further increasing taxes.”

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