In support of student protests yesterday there were calls to add revenues to education budgets by taxing oil production. Building continuing programs on the foundation of diminishing resources is faulty architecture.
Both Assemblyman Alberto Torrico in the Huffington Post and Joe Mathews in Fox and Hounds Daily called for an oil severance tax to fund education.
But, such a move would have threatening consequences to the economy and to financially strapped Californians. As I wrote a couple of months ago on this page, the tax expense will likely be passed on to consumers at the pump. The cost of production may slow or eliminate some wells. That means Californians will have to import more oil. Jobs would be cut so the oil companies have the revenue to pay their tax bills.
Furthermore, as I pointed out in a Sacramento Bee article last summer commenting on a report from the Milken Institute, companies like Chevron produce a "multiplier effect" that creates jobs and sparks economic activity both through the supply chain linked to the company and through consumption practiced by the business and its workers. The Milken researchers estimated that in 2007, 1% of all California state and local taxes were paid by the Chevron company and its employees alone.
Many of those jobs, and the tax revenue that comes with them, will be put in jeopardy if taxes are raised on the company. In the end, an oil severance tax could produce lower tax revenue related to the oil business and help increase the price of gasoline.
* * *
In an economic downturn you would expect crime to soar. But, Los Angeles is enjoying a period of extraordinary calm, at least measured by the crime of murder.
Timothy Egan in today’s New York Times reports that the nation’s second largest city has the lowest murder total since 1957. One is more likely to get murdered in Omaha, Nebraska or Columbus, Ohio than in Los Angeles these days. CSI Omaha, anyone?
* * *
Here’s hoping Greece’s economic and debt problem is not a forerunner of what we might face in California. Although last month the chairman of JP Morgan Chase warned that California’s debt situation was more problematic than that of Greece.
To leverage Greece’s debt, some German politicians have suggested Greece sell off some of the uninhabited islands it controls. Of the 6000 islands off its coast, only 227 are inhabited.
I hope no one starts talking about selling Lake Tahoe or Yosemite if we can’t reduce our debt problem.