Monday, October 23, 2006

California's Proposition 87: Tax California Oil to Reduce Consumption of Foreign Oil

Yesterday I discussed the upcoming Congressional election in America. But on that day, there will not just be an election to the House and the Senate, there will also be a number of referendums. Republicans have in a few states pushed their favorite issue -banning gay marriage- on the ballot while Democrats have in other states put their favorite issue -raising the minimum wage- on the ballot. In addition to this there will also be a number of state specific referendums. The arguably most stupid referendum will be the one in California, proposition 87, raising the tax on oil extracted in California from 1.5% to 6%.

If you go the web site of the yes-campaign how their most important argument for raising the tax on oil extraction in California is to have "less foreign oil" and increase "energy independence". That's right: the idea is to discourage oil extraction in California so as to induce Californian's to use less foreign oil. Normal people would realize that if there is less California oil, then the result will be that people in California will demand more foreign oil as a substitute and certainly not less, but these people apparently don't mind embarrasing themselves by campaigning using the absurd assumption that less California oil will mean less foreign oil.

But perhaps they think this tax will raise oil prices and so lower overall consumption? No, on their web page they also come up with another absurd claim, that this will cost consumers nothing, which rule out the idea that this is the mechanism they imagine.

So what they believe is that if you reduce the supply of something by taxing it, it will not lead to a higher price and it will at the same time lead to a lower supply of untaxed foreign substitutes.

These people just must be competing for the "stupidest people alive" award. What else could motivate people to embarrass themselves with such stupid reasoning is beyond me.


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