Newsom Redefines Oil Company Windfall ‘Tax’ as ‘Penalty’ to Avoid 2/3 Vote

California Gov. Gavin Newsom listens to a question while meeting with reporters after cast
AP Photo/Rich Pedroncelli

California Gov. Gavin Newsom (D) changed his plan for a windfall tax on oil company profits to describe the tax as a “penalty” to avoid a requirement that new taxes be passed by a two-thirds vote in the state legislature.

As Breitbart News reported Monday, Newsom has called the legislature into a special session to consider a new law that would create a “price gouging penalty” on oil companies, blaming them for high prices at the pump.

(The legislature is not considering a revision to the state’s high gas taxes, nor to regulations that make oil more expensive and difficult to refine in California than in other states, which are major contributors to high prices.)

In September, when Newsom first tried to scapegoat oil companies for high gas prices, claiming that they are engaged in “extortion,” he called explicitly and publicly for a “windfall tax” on the energy companies’ profits.

Now, however, as Dan Walters of CalMatters notes, Newsom has attempted to claim that the “tax” is really just a “penalty,” because there may not be enough votes in the Democrat-dominated legislature to raise taxes again:

Why the change from taxes to civil penalties?

It has to do with the state constitution, which requires any tax to be passed by two-thirds majorities in both houses of the Legislature. Newsom is betting that the civil penalties that he proposes would be exempt from that requirement and thus need only simple legislative vote majorities to become law.

In other words, he’s not certain that despite overwhelming Democratic legislative majorities he could muster a two-thirds vote for a profits tax, due to a general reluctance among politicians to impose new taxes and the oil industry’s vigorous courting of support, aided by its influential unions.

Oil companies are still referring to the penalty as a tax, and would likely challenge it on legal grounds.

Newsom’s semantic games are reminiscent of another Democratic effort to play with the definitions of taxes and penalties. In 2012, the U.S. Supreme Court saved Obamacare from being overturned when Chief Justice John Roberts, supposedly a conservative with respect for the text of legislation, unilaterally decided that the law’s fine for failure to purchase health insurance was a constitutional tax and not an unconstitutional penalty.

Democrats had deliberately avoided referring to the fine as a tax when drafting the legislation because they feared a public backlash against raising taxes. Ultimately, they were able to get away with it, thanks to Roberts.

Joel B. Pollak is Senior Editor-at-Large at Breitbart News and the host of Breitbart News Sunday on Sirius XM Patriot on Sunday evenings from 7 p.m. to 10 p.m. ET (4 p.m. to 7 p.m. PT). He is the author of the recent e-book, Neither Free nor Fair: The 2020 U.S. Presidential Election. His recent book, RED NOVEMBER, tells the story of the 2020 Democratic presidential primary from a conservative perspective. He is a winner of the 2018 Robert Novak Journalism Alumni Fellowship. Follow him on Twitter at @joelpollak.


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