Felipe Avalos

Ad Watch: Proposition 87

One of the most talked about issues among everyday people is gas prices. During the 1990’s the average price for a gallon of unleaded gasoline, according to the California Energy Commission, ranged from $1.09 in 1990 to $1.36 in 1999 (adjusted for inflation 1990 would be $1.54/gal and 1999 $1.61/gal.)[1] In 2006, the gas price average peaked to an astonishing $3.33 per gallon of regular unleaded gasoline. These record prices, in turn, translate into record profits. In California, Chevron earned a 49 percent increase in profits.[2] With these higher profits comes more tax revenue for California and a new proposition to raise taxes on those profits. It is called Proposition 87. Supporters of proposition 87 say that the new taxes will be used to fund alternative energy programs that will reduce dependence on foreign oil. One of the mounting arguments of those who are against proposition 87 is that raising taxes on oil companies will raise gas prices. Additionally, the principal contention raised by opponents of proposition 87 is that proposition 87 “Is a recipe for waste, not progress.” This paper will analyze the tactics of a specific campaign ad against Proposition 87.

Before analysis, it is important to understand what proposition 87 would put forward. According to a summary in the 2006 California General Election Official Voter Information Guide proposition 87 “Establishes a $4 billion dollar program to reduce petroleum consumption through incentives for alternative energy, education and training. Funded by tax on California oil producers.” It is important to note that this oil tax would only apply to oil produced in California and not on oil imported from Alaska and foreign countries. Currently, per gallon of gasoline, Californians pay 58.5 cents in taxes including the federal tax, state tax, and other taxes. On state taxes alone, it is 40.1 cents per gallon ($16.04 per barrel.) Proposition 87 would add a severance tax to oil produced in California anywhere from 1.5 percent if the price per barrel of oil was $10 to $25, to 6.0 percent if the price per barrel of oil was $60.01 or more. (It is indistinct how exactly the new tax will be computed. According to the legislative analysis “the tax would presumably be resolved by regulations adopted by the California State Board of Equalization and interpretation by the courts.”) Since there will be new tax revenue to be used for new programs, a bureaucracy will be established. Opponents of proposition 87 contend that a “new” bureaucracy will be established. In truth, the California Alternative Energy and Advanced Transportation Financing Authority will be molded into a new (essentially re-named) California Energy Alternatives Program Authority. Basically, as stated in the Official Voter Guide proposition 87, “would reorganize an existing body.” This “body” would allocate the new tax money into various accounts. The percentages of funds received are broken down as followed: Gasoline and Diesel Use Reduction Account 57.50 percent; Research and Innovation Acceleration Account 26.75 percent; Commercialization Acceleration Account 9.75 percent; Public Education and Administration Account 3.50 percent; Vocational Training Account 2.50 percent. The new California Energy Alternatives Program Authority would receive up to 2.5 percent of the new tax revenue for administrative costs.[3] Since the new tax is directly aimed at California oil producers, it is no surprise that those producers will campaign against proposition 87.

I watched the first campaign ad against proposition 87 during a commercial break from NCIS on CBS 13. In black and white and with no background music, newspaper after newspaper whipped the air as they slammed down on a rough background. No humans were presented just newspapers. A female voice declared that newspapers from California have been “recommending” voting no on proposition 87. Eight newspapers from major cities throughout California headlined “Vote No on Prop 87,” “No on 87,” “Vote Down on 87.” The word “Editorial” was clearly visible above each headline, on the top right hand side of each newspaper. The title, although not stated until the end, was “Vote No on 87. It’s a recipe for waste, not progress.” This same title phrase appears on their website www.nooiltax.com. In grey microscopic text under the website read the payers of that ad: “Californians against higher taxes.” (Among that coalition is Chevron Corporation and AERA Energy LLC, one of California’s largest oil producer companies. AERA Energy has contributed over 12.6 million dollars and Chevron Corporation has contributed 22 million dollars to defeat proposition 87. In total, roughly 45 million dollars have been wagered.)[4]

Although the ad voiced the opinions of newspapers, it did not specifically voice the sponsor’s opinions on why this proposition should be defeated. At the end, the ad simply reiterated the newspapers ideas that this proposition was wasteful and not a matter of progress. With the newspapers being presented as the all knowing group, this ad takes on a bandwagon appeal. Simply defined, to join the bandwagon is to join those who know.[5][6] To not join the bandwagon means you are not in the know. In this ad, those who know or at least those who are thought of to be in the know are the people in newspapers. Since newspapers throughout California say that proposition 87 is a bad idea then it must be a bad idea. ‘Trust and join those who bring you the news for they say No on 87’ seems to be the obvious subtext of this ad.

The several claims made by the newspapers contest the essence of proposition 87. “Proposition 87 champions a worthy cause… Unfortunately the backers picked a lemon of a vehicle.” This argument came from the Sacramento Bee’s Editorial section on September 21, 2006. Essentially, the ‘lemon of a vehicle’ is proposition 87. The ‘new’ bureaucracy that will be established under this proposition will have no legislative oversight, according to the Sacramento Bee. Additionally, there could a conflict of interest because those who would sit on the new ‘board,’ comprised of UC professors, may direct funds to other UC professors.[7]

The next claim originated from the San Diego’s Union Tribune. As stated in the article, Proposition 87 would “increase the state's dependence on foreign oil and lessen global supplies, driving up the price.” This conclusion stems from the idea that since California oil producers would need to sell their product to oil refineries at a higher rate because of the new taxes the oil refineries can simply purchase oil from other sources such as foreign countries because it would be cheaper. Simply put, refineries would shop for a lower price. By doing this, California would take a bigger chunk from the ‘global supply’ of foreign oil, an action that would hence drive up the price.[8]

Originating from the Los Angeles Times Editorial section the third claim states that, “creating a state bureaucracy to oversee R&D in this industry is a spectacularly bad idea.” The article does not sternly press on the issue of oversight. The article mainly suggests that abundant money is already being “pumped” into the private sector to promote alternative energy programs. The new oil tax on California oil producers is an “extortion tax.”[9]

Ultimately, the last quoted statement was from the San Gabriel Valley Tribune, “end up costing the state and taxpayers for years to come.” The article seems to say that the ‘new’ bureaucracy will have 50 political appointees who will in some cases be former “legislators looking to reclaim a spot on the public payroll.” Similar to the L.A. Times argument, SGV Tribune says that plenty of private money is being steered to help companies such as the Virgin Group and Edison boost alternative energy programs. Their call to us is “to question the need to raise taxes.” It also states, “[Proposition 87] isn’t half-bad - after all, the state could benefit from increased research into wind, bio-fuels, nuclear, hydrogen and solar energy uses.” However, “Taxing oil companies isn’t the problem. Setting up an agency with no accountability and rife with possible conflicts of interest most definitely qualifies as problematic.”[10]

All of the quotes used were obviously different. But the articles from which they originated from essentially contain similar arguments about proposition 87 being a bad idea. In sum, the problems are: a lack of legislative oversight in a new established bureaucracy, unnecessary taxes that would fund an otherwise already well funded alternative energy program, and the supporters of this proposition seek to gain a plethora of funds for their own companies and pursuits. Highly significant, however, is the fact that none of the newspapers directly said that proposition 87 would raise gas prices, a claim that is widely used in other ads.

With the existence of several newspaper editorials declaring that proposition 87 is a bad idea, it is difficult to investigate whether the editorials are somehow corrupted. That is, to conclude that these newspapers are somehow conspiring on behalf on those who want to demolish proposition 87 would have difficulty making the case. Twenty eight newspapers are urging voters to vote no on proposition 87.

Most of the evidence that these newspapers use appear to originate from the information provided in the voter guide, specifically from the “Analysis by the Legislative Analyst.” Here, the analysis states that there are two ways that the new oil tax can be interpreted. This was an argument by one the editorials. It claimed that this proposition is poorly conceived that interpreting how the exactly the oil producer will be taxed is ambiguous. The analysis also points out that oil companies can simply shop for cheaper oil, foreign oil perhaps. This is another reason newspapers chose to include in their editorials. The analysis, however, does not assert that having a new bureaucracy will complicate matters. This is an interpretation that newspapers concluded perhaps from prior experiences in which new bureaucracies had “conflicts of interest.”

The analysis contained in the official voter, I believe, examines the proposition best. It does point out ambiguities in proposition 87 but it does not necessarily mean that such ambiguities are negative or that they are not up to further interpretation. This proves the analysis’s neutral interpretation.

The ad against proposition 87 is a good one. The black and white and the newspapers slamming down makes one believe that they are talking serious business. The idea of using an informative figure, the newspapers, makes this ad seem credible. If the newspapers say that proposition 87 is a bad idea, regardless of the origination from the editorials, then it must be a bad idea. That a population will try to come up with the time and effort to challenge these assertions is impossible (unless they are well compensated or it’s a homework assignment). The ad uses an effective method to convince voters to vote no on proposition 87.

[3] http://www.voterguide.ss.ca.gov/props/prop87/analysis87.html