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For those who have not seen this yet -
? ----- Original Message ----- =20 From: Lisa Martin=20 To: lisa@caltax.org=20 Sent: Tuesday, May 08, 2001 11:48 AM Subject: Cal-Tax e-Alert: Windfall Profits Tax=20 [IMAGE] Cal-Tax e-Alerts keep you informed on key tax and public policy=20 issues?related to your industry as they develop.? We invite you to visit= =20 Cal-Tax Online (http://www.caltax.org) for more information on this and=20 other Cal-Tax activities.? If you wish more information about Cal-Tax's=20 e-Alerts or Cal-Tax Online, please contact Greg Turner at greg@caltax.org?= =20 If you wish not to be included on future Cal-Tax e-Alerts, please contact= =20 Betty Rickard at betty@caltax.org and your address will be removed from o= ur=20 distribution list.=20 May 8, 2001? To:????????????Cal-Tax?Board of Directors and?Interested?Parties??? From:????????Ron Roach, Communications Director?? Subject:????Update of Windfall Profits Tax Legislation? The following is advance Caltaxletter coverage of the May 7 California=20 Legislature's actions on two bills that would impose "windfall profits"=20 taxes on producers of electricity:?? ? SENATE APPROVES =01&WINDFALL PROFITS=018 TAX AS ROLLING BLACKOUTS HIT?????= ? Nearly coinciding with rolling blackouts plaguing California for the first= =20 time since mid-March, the Senate on Monday approved a =01&windfall profits= =018 tax=20 on energy producers (SB 1X, Soto). Critics said the measure establishes a= =20 perverse tax incentive not to sell power in California and will reduce=20 electricity supply even further, increasing prospects of future blackouts.= ?? Twenty-five Democrats voted =01&aye=018 on SB 1X, while 12 Republicans vot= ed=20 against it. Because the bill did not pass with 27 votes, or two-thirds of= =20 the Senate as required by Proposition 13, there will likely be a court=20 challenge on this point. Meanwhile, just hours earlier, the Assembly Revenue and Taxation Committee= =20 approved a slightly different version of a =01&windfall profits=018 tax (A= B 128X, =20 Corbett), despite the fact that the bill was substantially amended at the = =20 hearing. SB 1X imposes a 100 percent excise tax on sales of electricity at a price= =20 above $80 per megawatt-hour. It also establishes a refundable tax credit= =20 equal to the amount of revenue generated by the tax. AB 128X establishes a retroactive (to January 1, 2001) sliding-scale tax o= f=20 50 percent of gross receipts on electricity sales over $60 per=20 megawatt-hour; 70 percent of the gross receipts of sales over $90 per=20 megawatt-hour, and 90 percent of gross receipts of sales over $120 per =20 megawatt-hour. The rate of tax can be changed =01&from time to time=018 by = the =20 California Public Utilities Commission. ?The bill will likely tax sales not= =20 made in California, because it defines =01&sales of electricity to a retail= er=018=20 in California to be the higher of the ratio of sales in California to the= =20 total sales or percentage of total electricity sales everywhere, using a= =20 ratio of total sales everywhere in the year 2000 to sales in California in= =20 the year 2000.? Debate in the Senate was hotter than the 95-degree temperature outside.=20 Democrat Senator Steve Peace, who is generally given credit for pushing th= e=20 electricity deregulation bill through the Legislature in 1996, became high= ly=20 emotional in denouncing energy producers.? Continuing to blame the California crisis on the Federal Energy Regulation= =20 Commission (FERC), as well as Harvey Rosenfield=01,s Proposition 9, which= =20 sought to unravel deregulation in 1998 and caused a two-year delay in=20 construction of additional power plants, Senator Peace called SB 1X the=20 =01&only reasonable alternative.=018? He said it will bring competition to = the =20 market with rules and =01&a referee who will blow the whistle.=018 He descr= ibed=20 FERC as =01&the proverbial cop in the donut shop who refuses to enforce th= e=20 law=018 and limit what wholesalers can charge.? Republican Senator Ray Haynes said the tax would not bring additional=20 electricity to Californians. =01&We are going to make sure by passing this= bill=20 that the lights will go out,=018 he said.?? Democrat Senator Debra Bowen said the prospect of taxing excess profits=20 =01&will grab (energy producers) by the horns and their hearts and minds w= ill=20 follow.=018? Republican Senator Tom McClintock said the tax would cut supplies of=20 electricity, noting that other states, such as Texas and Nevada, are=20 building, or will build, power plants to serve California with investments = =20 that benefit those states=01, economies, not California=01,s. =01&To make e= lectricity =20 cheap, we have to make it plentiful. This is a very wrong step in a very=20 wrong direction,=018 he said.? At the Assembly committee hearing, numerous speakers sought to testify for= =20 and against the bill. However, Democrat Assembly Member Helen Thomson=20 (chosen by Committee Chair Ellen Corbett to preside instead of the =20 Republican vice-chair, which in itself was unusual) limited testimony to tw= o =20 witnesses on each side.? Speaking for the tax were Jean Ross, executive director of the California= =20 Budget Project, and Lenny Goldberg, of the California Tax Reform=20 Association, organizations funded largely by public employee unions or=20 liberal-leaning foundations that generally oppose tax relief and support = =20 increased government spending. Ms. Ross urged immediate action, saying=20 consumers will be paying 1.5 percent of their income on power purchases in= =20 the next year. Mr. Goldberg called the proposal a viable and realistic=20 solution, which he said he hopes is constitutional.?? Providing opposition testimony were Carrie-Lee Coke, representing the=20 California Manufacturers and Technology Association, and Steven Kelly of t= he=20 Independent Energy Producers.? Ms. Coke said the bill is a disincentive to= =20 more supply and will make the current crisis worse. She said it also appli= es=20 to the cogeneration operations of California manufacturers. Mr. Kelly told= =20 the committee that the bill jeopardizes plans for as much as $10 billion i= n=20 private capital investment in new California power plants.?? A number of others were allowed to state their affiliations and their=20 positions on the bill. Among supporters were the California Labor Federati= on=20 and the California Public Interest Research Group. Opposition included the= =20 California Chamber of Commerce, InterGen, and BP?Amoco.? Committee Member Elaine Alquist asked to be a co-author of the bill, sayin= g=20 it is about time =01&we did something.=018??AB 128X was approved by a 5-0 = vote,=20 with Republicans abstaining. Assembly Member Mark Wyland said he abstained= =20 because he believes that while California is being gouged by high energy= =20 prices, the bill is anti-free market and incentives are needed to develop= =20 more power to avoid blackouts.? Meanwhile, Governor Gray Davis =01&is open to the idea=018 of such a tax, = but has=20 not endorsed either bill, said his press secretary, Steve Maviglio. =01&It= just=20 depends on the bill.=018?????? ? - e-alert3.gif
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