Thursday, June 11, 2009

Tax on "big oil" is just passing gas

The following is from the Wisconsin Club for Growth Wednesday newsletter. I thought it a timely reminder of the stakes regarding the proposed tax on "big oil", a tax even Democrats now concede will be passed along to the consumer.

Passing Gas

For the second straight budget, Governor Jim Doyle included a 2.5% tax on oil companies which he claims won't be passed on to drivers at the pump. But studies have shown that one way or another, the increased cost to oil companies will be paid by consumers.

Of course, every company passes along tax increases to consumers, making their goods more expensive. Doyle's proposal would add between five and eight cents to a gallon of gas at the same time prices are nearing $3.00 per gallon.

Representative Robin Vos, a member of the Legislative Joint Finance Committee, pointed out that if the new tax is applied on a percentage basis, the tax will increase as the price of gas goes up. The current gas tax is a flat per gallon fee. In this regard, the oil franchise fee approximates the old gas tax indexing system, where gas taxes increased automatically every year without legislative action. The legislature repealed the indexing system in 2005 after Governor Doyle repeatedly raided the transportation fund to pay for other programs, at the same time he increased debt to pay for transportation projects.

At Vos’ request the Legislative Fiscal Bureau prepared a memo detailing the cost of the new tax to consumers. At $2.50 per gallon, the gas tax is expected to increase the per gallon cost by 4.9 cents. But if gas prices reach their 2008 summer levels of $4.00 per gallon, the state will tack on 8.7 cents to every gallon of gas.

Of course, legislative liberals still claim that their budget doesn't raise taxes on people in the middle class, like those wealthy people who fill up their cars to drive their kids to school and swimming lessons.

The Assembly will have an opportunity to remove the new tax when they vote on the budget Thursday, so be sure to contact your legislators today.