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----- Original Message ----- =20 From: Lisa Martin=20 To: lisa@caltax.org=20 Sent: Tuesday, May 01, 2001 1:41 PM Subject: Cal-Tax e-Alert: Windfall Profits Tax Update ? [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 , 2001? To:????????????Cal-Tax?Board of?Directors and Interested Parties??? From:????????Larry McCarthy, President? Subject:????Windfall Profits Tax Update?? This is?coverage that will appear in the next Caltaxletter, relating to th= e=20 latest development of?the windfall profits tax legislation:?? ?WINDFALL PROFITS TAX ON ENERGY PRODUCERS HITS SENATE FLOOR? Majority Democrats muscled n?electricity =01&windfall profits=018 tax bil= l to the=20 Senate floor on Monday when the Appropriations Committee approved SB 1X=20 (Soto), imposing a 100 percent excise tax on sales of electricity to=20 California that exceed $80 per megawatt hour. With Senate President Pro Tem John Burton leading the charge, the fiscal= =20 panel approved the bill on a party-line 7-3 vote.?? Opponents testified that the bill would have a perverse result by=20 discouraging investment in new energy generation in California despite a= =20 consensus over the need for additional power plants to add more electricit= y=20 and rein in the costs. =01&While it makes good political theater, this bill does absolutely nothi= ng to=20 solve the energy crisis,=018 said Mike Kahl, representing the Western Stat= es=20 Petroleum Association and alternative energy providers. He said such a=20 =01&confiscatory tax sends a perverse message=018 to investors in electric= ity=20 generation to avoid California. He also said it is a =01&transparent attem= pt=018=20 to enact illegal price regulation of interstate commerce. Carrie-Lee Coke of the California Manufacturers and Technology Association= =20 said the bill is the =01&wrong medicine,=018 would worsen the energy crisi= s by=20 reducing supply, and would cause =01&financial disaster=018 for CMTA membe= rs. Carl London, representing InterGen, an international energy generator, sai= d=20 SB 1X will scare away investment in badly needed power plants. =01&I can s= ay=20 with all certainty that the prospect of having this bill hanging out there= =018=20 will cause InterGen to stay away from California, he said.=20 Senator Burton said the bill =01&says you can=01,t come in and rip us off.= It=20 doesn=01,t say you can=01,t come in and do business.=018?? Senator Jack Scott, principal co-author of the bill, said, =01&We have bee= n=20 royally mistreated=018 by energy providers headquartered in other states t= hat=20 have =01&gouged us like no consumer has been gouged in history.=018 He sai= d the=20 bill still =01&guarantees a generous profit for wholesalers.=018?? Revenue from the tax would be returned to California through income tax=20 rebates. Since none of the revenue goes into the state=01,s general fund a= nd=20 would be returned to taxpayers, proponents contend that the revenue-neutra= l=20 bill can increase a tax by mere majority-vote approval of the Senate and= =20 Assembly, not the two-thirds majorities required for tax increases in the= =20 state Constitution. Cal-Tax has long disagreed with this interpretation.? Supporters of the bill included Toward Utility Rate Normalization,=20 representing =01&small=018 ratepayers; the public-employee financed Califo= rnia Tax=20 Reform Association; the California Public Interest Research Group; the=20 California Labor Federation and the Service Employees International Union.= ? When Senator Jim Battin noted that the bill would impose windfall profits= =20 taxes on energy contracts negotiated by the Davis Administration (at $86 p= er=20 megawatt hour), Senator Scott agreed to amend the bill to exempt existing= =20 contracts.? While Governor Gray Davis has indicated support for a windfall profits tax= ,=20 his Department of Finance had no position at Monday=01,s hearing. A=20 spokesperson said there was no analysis from the Franchise Tax Board on th= e=20 impact on state revenues. The department also noted that a company would= =20 have to have nexus (physical presence) in California to be taxed, so at=20 least some of the wholesalers could be immune. The department also express= ed=20 concern about how poor people would benefit if they don=01,t earn enough t= o=20 file income tax returns.?? Co-authors Nell Soto and Scott accepted a number of amendments suggested b= y=20 committee staff.? ? ? ? ? - e-alert3.gif
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