Fw: Cal-Tax e-Alert:  Windfall Profits Tax Update ,
 ?
----- 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



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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.?

?

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