With gas prices already high, Newsom presses ahead with windfall tax on oil companies

Governor calls special legislative session on Dec. 5 to consider plan.

Published: October 7, 2022 7:32pm

Updated: October 10, 2022 11:05am

(The Center Square) -

California Gov. Gavin Newsom is calling a special session on Dec. 5 for lawmakers to discuss a proposed windfall tax on oil companies, a move that he says will address “greed,” but admitting it could face legal scrutiny.

Newsom proposed a new tax on the excess profits of oil companies last week, announcing that he wants to deliver refunds or rebates back to taxpayers who have been “fleeced” by companies engaging in “gouging.” Under Newsom’s proposal, companies who are involved in extracting, producing and refining oil will pay a higher tax rate on earnings over a certain amount. The “recouped windfall profits” would be directed to taxpayer refunds, his office said last week.

The Legislature is already set to reconvene on Dec. 5, but Newsom announced Friday he is calling a special session upon lawmakers’ return to Sacramento to urgently address his proposal.

“We’re gonna get the money back that they’ve been gouging and taking from the pockets of hard-working Californians,” Newsom told reporters on Friday.

Newsom’s announcement comes as gas prices have reached near-record levels in the Golden State over the last week, spiking to $2.50 over the national average. Experts say the latest surge in California gas prices is due to a supply chain crisis caused by refineries shutting down last month, but Newsom asserted Friday that the high prices are due to gouging.

The announcement also came the same day the state began distributing $9.5 billion worth of rebates to millions of Californians meant to provide relief to high prices residents continue to face. Newsom’s office estimates that 23 million taxpayers will benefit from the rebates, who qualify for a payment ranging from $200 to $1,050 depending on income and dependents.

The governor told reporters Friday that he wants to take a “similar approach” to deliver refunds from the windfall tax as the state did with the current rebate.

Critics of Newsom’s windfall tax proposal asserted that it could actually cause prices to spike even higher in the Golden State. California Taxpayers Association President Robert Gutierrez said in a statement last week that “another tax increase that makes the production process more expensive would result in even higher prices for drivers.”

The special session will occur nearly a month after the Nov. 8 election, when more than two dozen new lawmakers will join the Legislature following many members announcing they are either retiring or not seeking re-election, as reported by CalMatters.

When asked about the decision to wait until after the election to call the special session, Newsom told reporters that he is taking time to work with leading lawmakers to get the proposal in order. The governor acknowledged Friday that oil companies will likely respond with litigation to the proposal, noting he is working with lawmakers to weigh “legal options.”

Assembly Speaker Anthony Rendon and Senate President Pro Tempore Toni Atkins released a joint statement in response to Newsom’s special session announcement, saying they “look forward to examining the Governor’s detailed proposal when we receive it.”

“As stated last week, a solution that takes excessive profits out of the hands of oil corporations and puts money back into the hands of consumers deserves strong consideration by the Legislature,” Atkins and Rendon said.

The governor’s call for a special session was met with criticism by some Republican lawmakers Friday, many of whom have tried unsuccessfully to suspend the state’s gas tax in response to high prices.

“Newsom is calling a Special Session of the Legislature for the sole purpose of raising taxes. Parody and reality have become indistinguishable,” Assemblymember Kevin Kiley tweeted.

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