CALIFORNIA OIL PRODUCTION TAX DEFEATED
By a 55 percent to 45 percent vote, voters in California rejected Proposition 87, a measure that sought to reduce oil consumption in California by 25 percent and impose a new tax on oil production to raise $4 billion for a range of alternative energy programs.
Polls during the summer showed the measure with strong support, but it fell away as the implications became known. Spending by both sides in the debate totaled more than $130 million, making this the most expensive initiative battle in California history.
Support Dried Up
Al Lundeen, a spokesman for Nooiltax.com, which opposed the measure, said there were several reasons enthusiasm for the proposition dried up as the campaign went on.
“There was nothing in Prop. 87 that required the new agency to produce any results,” said Lundeen.
“The biggest point in our favor was the cost to consumers. It would have resulted in much higher prices,” Lundeen said. “The symbolism of Prop. 87 put the proponents in a strong position to start, but as voters looked more closely, and as proponents refused to talk about the specifics of their proposal, voters found that Prop. 87 was a $4 billion tax increase that did not advance alternative energy.”
Thomas Tanton, vice president and senior fellow at the Institute for Energy Research, said people came to understand “the tax would have increased imports from crazy men like [Venezuelan President] Hugo Chavez, and the new tax money would have been separate from everything else, which would have reduced school funding and other critical programs. There was also the whole issue of a state bureaucracy with political appointees running this program.
“California has had 40 years of politically motivated energy policy and they haven’t gotten it right yet,” Tanton pointed out.
SEATTLE STADIUM SUBSIDIES REJECTED
Seattle voters overwhelmingly approved Initiative 91, a measure designed to block the National Basketball Association’s SuperSonics from receiving city tax subsidies for a new stadium.
Initiative 91 won by a 3 to 1 margin. It requires the city to receive a return “at or above fair market value” for any taxpayer investment in KeyArena or another facility leased to “for-profit professional sports organizations.”
Fair market value is defined by I-91 as “no less than the rate of return on a 30-year U.S. Treasury Bond.” The return on Treasury bonds is currently about 4.75 percent.
SuperSonics owners have been threatening to move the team out of Seattle if the city’s taxpayers do not finance the construction of a new stadium. The requirement for the city to receive a market return on stadium subsidies makes any subsidy plan almost impossible, according to city officials.
Team Plans to Move
“The team fully intends to honor its lease at KeyArena until 2010 and then hopes to relocate to a new facility outside of Seattle, but within King County,” Clayton Bennett, chairman of the team’s ownership group, said in a statement. He added a number of Seattle suburbs have expressed interest in hosting the team.
“If Mr. Bennett thinks for one moment that a vote like this in the city of Seattle will encourage state legislators to fund tax subsidies for a professional sports team anywhere in Washington state, he is dead wrong,” said Chris Van Dyk, a spokesperson for Citizens for More Important Things, which led the effort to pass I-91, to reporters at the Seattle Times the night of the election.
Jason Mercier, director of the Economic Policy Center of the Evergreen Freedom Foundation in Olympia, Washington, said the vote “is very encouraging. Even in a liberal city like Seattle, people are recognizing there are core functions of government. It was clear to voters this is not a core function of government and should not be funded by tax dollars.”
BILLIONS FOR INFRASTRUCTURE BONDS APPROVED IN CALIFORNIA
Five bond measures totaling $42.65 billion for spending on “infrastructure”–including transportation, housing, school construction, and water resources–won approval in California. Because of interest that would be charged on the borrowed money, the total cost of the bond proposals exceeds $80 billion.
The bonds package had the support of an unusual coalition that included Gov. Arnold Schwarzenegger (R), the pro-Democrat California Teachers Association, and the pro-Republican state Chamber of Commerce.
Tax watchdog organizations opposed the measures, arguing they lack accountability, do not ensure taxpayer dollars will be used on the most-needed projects, are an unfair and unsustainable means of financing the stated objectives, and ignore the failures of previously passed bonds.
Ted Balaker, policy analyst at the Los Angeles-based Reason Foundation, said, “The state with the nation’s lowest credit rating sinks even deeper into debt. California is in need of an infrastructure upgrade, but much of the spending will not actually build new roads, schools, or homes. Instead the bonds violate a core principle of public finance by devoting huge sums of money toward ongoing operations.
“It is the statewide equivalent of a deep-in-debt family that decides to sink even deeper into the red by paying for groceries with credit cards,” Balaker said.
CALIFORNIA CIGARETTE TAX HIKE DEFEATED
California voters refused to approve Proposition 86, a proposal to hike the state’s cigarette tax 300 percent, from 87 cents to $3.47 a pack.
Carla Hass, spokesperson for Californians Against Unaccountable Taxes, said in a statement, “Prop. 86 was an ill-conceived, special-interest measure, and we are pleased that California voters recognized this and have defeated the initiative.
“The defeat of Prop. 86 is due in large part to the tremendous efforts of the more than 300 physicians, educators, law enforcement, firefighters, and taxpayer and business groups who opposed the measure because of its fundamental and far-reaching flaws,” Hass noted.
The tax would have applied to cigars and smokeless tobacco products as well as cigarettes.
Less than 10 percent of the funds raised by the tax would have gone to programs related to tobacco use. Most of the money would have gone to hospitals, the main backers of the campaign. They inserted language into the proposal that would have exempted the state’s hospitals from antitrust laws.
EDUCATION FUNDING HIKES REJECTED
In Idaho, voters rejected a 1 cent sales-tax increase that would have pushed the state sales tax up to 6 percent.
The additional revenue would have created an Idaho Local Public Investment Fund to funnel more money to public education.
In Nebraska, voters overwhelmingly rejected a measure that would have allowed the proceeds of video “keno” gaming devices to be spent on K-12 education.
Video gaming is already legal in 140 communities in the state, near the borders with Iowa and Missouri, which now allow keno machines. Nebraska’s Initiative 421 would have allowed the expansion of keno gaming devices across the state and directed most of the proceeds to education.
Steve Stanek ([email protected]) is managing editor of Budget & Tax News.
