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CA Gov. Gavin Newsom proposes windfall tax on high oil company profits

Gas Prices (FILE)
Posted at 3:45 PM, Oct 05, 2022
and last updated 2022-10-06 00:20:38-04

BAKERSFIELD, Calif. (KERO) — Many consumers are feeling the pain at the pump, and California Governor Gavin Newsom is proposing levying what’s known as a windfall tax on oil companies to help drivers cope with surging gas prices.

“A windfall tax is essentially if a company earns too much profits, a windfall above and beyond what they normally would, then you get taxed on anything in excess of what the government would expect you to be earning,” explains Richard Gearhart, who is an associate professor of economics at California State University Bakersfield.

Gearhart also acknowledges that the higher gas prices are having a financial impact on many families.

The difference between $5.00 a gallon and $6.50 a gallon is about a hundred dollars a week, which is a considerable amount of money for the average American family,” said Gearhart. “It’s about $4,800 a year.”

Governor Newsom says the proposed windfall tax would provide relief for consumers, with the state sending the money collected from oil companies back to California residents. Newsom minced no words in rebuking the industry in his statement on the matter Wednesday.

“Oil companies, they provide no explanation. The fact is they are ripping you off,” said Newsom. “Their record profits are coming at your expense. That’s why today I’m calling for a windfall tax to ensure these profits go directly back to help millions of Californians who are paying for this oil company extortion.”

Gearhart doesn’t think Newsom’s plan is the answer to high gas prices.

“It’s a political play where it appears that the governor cares for low-income Californians, and he’s taxing people who are making higher profits,” said Gearhart, suggesting instead that an increase in domestic oil production is a better solution to the problem, but that such a solution would take some time to get results.

Kern County residents have noticed the rapid increase on gas prices recently.

“It’s crazy! It’s insane how high the gas prices went,” said Kern County driver Andreas Gomez. “I mean, they were down for a little bit. Everybody was loving it, and now it’s back up, and it’s hurting all of us.”

Gomez says he supports the proposed windfall tax on oil company profits, and he hopes that this gas crisis gets figured out.

“It’s not fair. So yeah, I think they should get taxed, and I think it’s something everybody should come to and figure out a way to work together,” said Gomez.

The California State Legislature is not currently in session. To create a windfall tax before the legislature reconvenes in December, Newsom would have to call a special session.