On the Soapbox

Looks like the extraction tax proposition (#87) is going to be defeated in California. Guess Big Oil's millions spent in that campaign did the trick (they tried to paint the extraction tax as a gas tax that will raise prices for consumers), but I'm still surprised; California, of all places! The thing that the opponents of prop 87 fail to mention is that California is the only state without an extraction tax, and that it is illegal for the extraction tax to be passed onto the consumers. Furthermore, because market demand has driven up the price of oil while extraction costs remain fairly constant, this means that the price of gas is dependent not on its extraction and production cost, but instead on market demand. Because there is no free entry into this market, this discrepancy between the price set by demand and the price that would have been set by production costs translates directly into an economic profit and this also makes it such that such a tax would have no effect on the final price seen by consumers (because those prices are bottlenecked and thus set by demand, not by extraction costs). So not only were the oil company's disinformation ads (which implied higher gas prices) completely misleading and false, this also means that California remains the only state without an extraction tax, making it the most oil-friendly state (what irony!).

Although an extraction tax is not perfect (a perfect solution would be an extraction tax coupled with a gasoline tax), it is important because it corrects for the market's failure to properly deal with exhaustible resources and an extraction tax is a perfectly market-compatible solution (in a state that is very regulation-happy, taxing instead of regulating is a step up for them). And it was defeated. Sigh. This is probably the single most disappointing result of the entire election¹, and I don't even live in California any more.

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¹ For some people, anti-taxes is their main issue. For some, it's pro-abortion, for some, it's anti-abortion, etc. Me? I really don't care about those issues. The one issue that motivates my politics more than anything else is the environment because what the heck do taxes or birth control matter if we destroy this planet? Moderate libertarianism is important, too, and I often couch my environmental views in that context: correcting for the market failures of environmental externalities is perfectly compatible with free-market libertarian ideology, but ultimately, the environment is still the litmus test issue for me, and if I had to choose between a populist anti-abortion environmentalist and a libertarian pro-abortion anti-environmentalist, I'd go with the environmentalist.