Oil tax Hits Harder as Prices Climb, Co-ops Say
MADISON, Wis. (May 7, 2009) – If an oil tax proposed in the state budget bill had been in effect last year it would have added almost eight cents per gallon to the already-soaring price of gasoline and more than nine cents per gallon to the price of diesel fuel, according to a statewide cooperative business group.
The figures developed by Cooperative Network reflect how the tax bite would grow when motor fuel prices increase. The statistical simulation of how the tax would have affected consumers in 2008 is based on data furnished by the Wisconsin Petroleum Marketers and Convenience Store Association.
The full brunt of the tax hike would almost certainly fall on retail consumers, the co-ops said, predicting that budget language forbidding recovery of the tax through higher pump prices is unlikely to remain in the bill.
The “anti-pass-through” language will probably fall by the wayside, Cooperative Network said, given a 2007 opinion from the nonpartisan Legislative Council and three later opinions from major Wisconsin law firms warning the provision would be unconstitutional.
Similar language has been found unconstitutional by a state court in New York. Were the tax enacted in Wisconsin with anti-pass-through language later ruled unconstitutional, the state would have to refund any revenue collected, with interest, to the companies that paid the tax.
But the Legislature is unlikely to risk that outcome so consumers will be saddled with the additional tax liability right from the start, Cooperative Network contends.
“This all looks pretty predictable,” said Cooperative Network President and CEO Bill Oemichen, who said his experience during the 1990s as Chief Legal Counsel for the Minnesota Department of Agriculture points the way.
“In a similar situation when the State of Minnesota attempted to impose a milk tax on dairy processors, the U.S. District Court required the state to refund millions of dollars,” Oemichen said. “Ultimately, this idea stands a better chance of losing revenue than of increasing it.”
The data shows how the proposed gross receipts tax would take a bigger bite as prices increase.
Because of monthly fluctuation in average wholesale fuel prices, the hypothetical application of the tax for calendar year 2008 would have collected a high of ten cents per gallon of gasoline in June and a low of just over three cents per gallon in December. Sustained high prices prior to a plunge in September would have resulted in a year-long average of 7.7 cents per gallon for gasoline.
Generally higher prices for diesel fuel make for a bigger tax bite from the start. The 2008 simulation shows an additional eight cents per gallon in January, climbing to nearly 12 cents through May, June and July, then trailing off from September onward as the economy slowed and prices fell, reaching the year’s low of 4.5 cents in December. Spread over the year, the average tax bite for diesel would have been 9.1 cents per gallon.
Added to the 32.9 cents Wisconsin already collects for each gallon of taxable motor fuel, the hypothetical 2008 collections would have moved Wisconsin from 9th highest taxing state to second for gasoline and fourth for diesel fuel.
The relative standing among the 50 states would vary since gross receipts tax collections would move up or down along with fuel prices, while the existing motor fuel tax would presumably remain fixed at 32.9 cents. Adding in the smaller federal tax brings the total current levy in Wisconsin to 51.3 cents for gasoline and 57.3 cents for diesel.
Cooperative Network serves more than 600 member-cooperatives, owned by more than 6.3 million Wisconsin and Minnesota residents, by providing government relations, education, marketing, and technical services for a wide variety of cooperatives including farm supply, health, dairy marketing, consumer, financial, livestock marketing, telecommunications, electric, housing, insurance, worker-owned cooperatives, and more.
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