Should We Tax Oil Companies to Pay for Roads?

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Jun 20, 2007 No Comments ›› Admin

June 20, 2007

“They call is a ‘Gross Receipts Tax’ on oil companies. We all know it’s really going to be a tax on you and me.”

“This is so frustrating – sitting in traffic on dangerous roads…state transportation funding is just not keeping up…”

Our ears have been bombarded with competing ads. Interest groups are paying to get their message to us. Groups are opposed to a new tax on oil companies. They are, no surprise, the oil companies themselves, and the large state business group Wisconsin Manufactures and Commerce. On the other side are the road builders, who, no surprise, want transportation money to build roads.

In the budget that the governor sent to the legislature was a new tax on the total amount oil companies make – the gross receipts. The tax collects 2.5 percent from the suppliers of oil to use for transportation funding.

Part of the governor’s plan was to prohibit oil companies from passing the tax on to people buying gas. He did this by allowing the Revenue Department to audit the oil companies. Violators could be fined, or jailed, or both.

There is a question about whether the governor’s proposal will work. On one side are people who argue the oil companies have made tremendous profits from those of us who pay and it is time they pay their fair share. In 2003 (the latest numbers I could find) Exxon made $21.5 billion in Wisconsin and paid only $913,726 in state taxes – a paltry .04 percent.

The other side argues it is impossible to tell if the oil companies changed their price because the market changed or because they headed into Wisconsin. The spot market on oil changes hourly. If the truck is headed from the refinery in Indiana to Appleton and the price changes, how do we know what caused the price to change?

Gov. Doyle is not the first governor to suggest this idea. Gov. Tommy Thompson proposed the same plan in the early 90s and New York passed the plan in 1980. The courts later struck down the New York plan as violating the Commerce clause of the U.S. Constitution.

Whatever the outcome of the oil tax proposal, the need for money for roads is real. For a variety of reasons, the transportation budget is short on cash.

The cost of asphalt has increased about 20 percent. Cities, counties and road builders are paying more for diesel fuel to run trucks and equipment. Gas tax indexing – a way to tie increases in gas taxes to increases in the price of gas – was repealed last legislative session because of high gas prices. While the repeal may have made good political sense, it was fiscally short-sighted.

The repeal created an $89 million shortfall in the current budget which will be carried into the next budget. This week I attended a budget briefing where the fiscal gurus told us that if we did not pass the tax there would be a $175 million hole in the Transportation Fund.

Different states pay for roads in different ways. Many states have high fees for registering vehicles. Some, like Illinois, have toll roads. Wisconsin has paid for roads through the gas tax. People who use the roads pay for the maintenance every time they fill up. All of our out-of-state visitors and truck drivers pay, too.

We all know the importance of roads. We need roads to get our children to school, the milk needs to get the cheese plant, the harvest needs to get to market and people need to get to work.

The governor is trying to be creative by taxing oil companies and auditing them to make sure they don’t pass the tax on to the rest of us. It might work, it might not.

Let me know what you think about how to pay for roads. Contact us! Call me in Black River Falls at 725/284-1730. Call Black River Falls at (715) 284-1730; In Eau Claire at (715) 838-0448 or in Madison at (877) 763-6636 (toll free); or write: State Capitol; P.O. Box 7882 Madison, WI 53707-7882 or email Sen.Vinehout@legis.wisconsin.gov.

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Voters for Vinehout

P.O. Box 1274
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