Governor Gavin Newsom believes California’s gas prices are too high. And he is correct. However, his claims that he can lower gasoline prices by forcing consumers to pay higher taxes will make a bad situation worse.
He would not likely couch his statements in this way, and it is important to note that as of this writing the governor has not made any specific legislative proposals. Nevertheless, just like President Biden, he continually asserts that an increase in the gasoline excise tax is needed because oil producers are earning “windfall profits”.
Oil company profits were high last year; for example, according to ExxonMobil’sXOM -2.7% financial statements, they earned over $23.0 billion in 2021. But when do profits magically transform from ordinary profits into windfalls? The answer is entirely subjective.