Corbett to propose removing gasoline wholesalers' tax cap

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Gov. Tom Corbett next week will propose a transportation funding plan that adopts the principal recommendation of a commission he appointed two years ago -- removing an artificial cap on the tax paid by gasoline wholesalers, according to a state official familiar with the plan.

At present, the Oil Company Franchise Tax is levied only on the first $1.25 per gallon of wholesale price. Eliminating the cap would cause the tax to apply to the entire wholesale price.

The Pennsylvania Highway Information Association has calculated that full removal of the cap would raise an additional $1.85 billion for the state.

Lifting the cap was the biggest revenue producer suggested by the governor's Transportation Funding Advisory Commission in a report it issued in 2011.

Other commission recommendations were to increase some driver fees such as vehicle registrations to offset the inflation that has occurred since they were last raised in 1997; efficiency improvements at the Pennsylvania Department of Transportation, including biennial rather than annual registrations; and increases in fines for traffic offenses.

The money would be used to improve roads and bridges and other transportation modes and shore up the state's ailing public transit agencies.

Mr. Corbett campaigned on a pledge not to raise taxes. Members of his administration previously have said lifting the cap on the oil franchise tax is not a tax increase but rather the closing of a loophole.

It was not known whether he intended to adopt the commission's other recommendations.

The governor's announcement is scheduled for next Thursday. At an unrelated event in Hershey today, he declined to discuss his plan.

"When we are ready to come out and present our plan, we will. I will say, from what I saw in the newspaper today, some of their information is wrong. ... We will talk to you next week," he said.

The governor may have been referring to news reports inaccurately describing the oil franchise levy as a tax on gasoline stations.

Because the Oil Company Franchise Tax is not directly levied on the pump price of gasoline, it is difficult to predict how much removing the cap would impact retail gasoline prices, said Jason Wagner, managing director of the Pennsylvania Highway Information Association.

Using current taxation rates and regulations, a full removal would increase the tax paid by wholesalers by 28.5 cents per gallon.

"It would cripple us," said Mike Adams, co-owner of Adams Petroleum Products Inc., a wholesaler based in Ohio Township.

Corbett administration officials have said previously that they did not expect oil companies to pass along the entire increase to consumers. The governor's commission recommended removing the cap gradually over a five-year period to lessen any impact on prices.

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Jon Schmitz:, 412-263-1868 and on Twitter: @pgtraffic.


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