Wisconsin budget’s oil company tax creates concern

| 6/4/2009

A first-of-its-kind effort to tax big oil companies, which is attached to the proposed Wisconsin 2009-2011 budget, is causing a great stir.

The Owner-Operator Independent Drivers Association was quick to act in opposition to the effort because of concern about the effect it could have on pump prices.

At the urging of Gov. Jim Doyle, the Legislature’s Budget Committee voted to advance a provision to the Assembly floor that would apply a franchise fee on oil companies doing business in the state. The projected $260 million in revenue during the next two years would be used to pay for roads.

Advocates say the oil company tax also would help the state cope with a projected $6.6 billion budget shortfall.

The tax is a percentage based on revenues of the oil companies. Companies would be prohibited from passing the tax along, but even supporters aren’t sure whether that could be enforced.

Some of those critical of the plan say the state’s roads wouldn’t be in the shape they are if Doyle hadn’t transferred more than $1 billion from the transportation fund to other state programs.

Critics, of which there are many, are also concerned about the proposal’s legality. Others say the state would have to fork over millions fighting for it in court.

Opponents, including OOIDA, also worry about the tax being passed along by the oil companies to consumers. At $2.50 per gallon, the Association points out the tax would add more than 6 cents to the state’s 32.9-cent-per-gallon tax on diesel and gas. If prices continue to increase, the per-gallon tax would only climb higher.

OOIDA issued a Call to Action to its Wisconsin members urging opposition to the franchise fee.

The Assembly could vote on the proposal as early as next week. If approved there, it would advance to the Senate for further consideration.

In recognition of the difficult task of keeping the oil tax in the budget, Doyle said he is willing to consider a 3-cent-per-gallon fuel tax increase as an alternative.

Until about two years ago, Wisconsin allowed for automatic indexing of the state’s fuel tax. For 20 years, the automatic increase in the tax was adjusted for inflation on April 1 each year.

Doyle has since said the state probably would have been better off to have stuck with the automatic increases.

To view other legislative activities of interest for Wisconsin in 2009, click here.

– By Keith Goble, state legislative editor

Editor’s Note: Please share your thoughts with us about the legislation included in this story. Comments may be sent to statelegislativedesk@ooida.com.