Corbett eyes wholesale tax on gasoline
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Gov. Tom Corbett's transportation funding plan will rely heavily on a tax on gasoline -- the one paid by suppliers, not by drivers -- and would have an uncertain impact on pump prices.
Mr. Corbett will propose removing a cap on the Oil Company Franchise Tax, which is levied against the first sale of gasoline as it enters the state, typically between refiners and distributors, according to a state official familiar with the plan.
At present, the tax applies only to the first $1.25 per gallon of the wholesale price. Eliminating the cap would cause the tax to apply to the entire "average wholesale price" of gasoline as determined annually by the state Revenue Department -- $3.114 for this year.
The Oil Company Franchise Tax is set at 153.5 mills. The state collected $1.3 billion in revenue from the tax in the 2011-2012 fiscal year, according to the Department of Transportation.
The Pennsylvania Highway Information Association, an advocacy group representing construction, trucking, business and automobile interests, said elimination of the cap would add about 28.5 cents to the current 19.2-cents per gallon tax paid by wholesalers, generating $1.85 billion in new revenue for the state.
Because of multiple factors influencing gasoline prices, "it's really hard to say what lifting the cap will mean to the consumer," said Jason Wagner, the group's managing director. Distributors may absorb some of the higher taxes to keep their prices competitive, he said.
One local fuel distributor, Mike Adams, co-owner of Adams Petroleum Products Inc., based in Ohio Township, said the proposal "would cripple us."
He said the plan also seeks to change the point of taxation, forcing suppliers to pay when they purchase the fuel from oil companies rather than reporting and paying it later. "It's going to cost us so much more on a daily basis ... you're going to need to have more capital to operate. Banks don't give capital for free," Mr. Adams said.
Mr. Corbett on Thursday declined to talk about his plan, saying it will be revealed next week. He will make the announcement Thursday. Lifting the cap would require approval of the state Legislature.
"When we are ready to come out and present our plan, we will. ... We will talk to you next week," the governor said at an unrelated event in Hershey.
Corbett administration officials previously have said removing the cap would not violate his campaign promise not to raise taxes, noting that the rate of the levy wouldn't change.
Lifting the cap was the biggest revenue producer recommended by the governor's Transportation Funding Advisory Commission in a report it issued in 2011. The 40-member panel proposed that the cap be lifted gradually over five years to lessen any impact on consumers.
It was not known whether Mr. Corbett will embrace other recommendations of the commission. It called for adjusting license, registration and other vehicle fees to compensate for the inflation that has occurred since the Legislature last raised them. For example, the registration fee, last increased in 1997, would go from the current $36 to about $50 per year.
To reduce administrative costs, drivers would purchase a two-year registration rather than renewing annually. Driver's license renewals would be extended to every eight years instead of the current four. Together, those changes would save the state more than $5 million, the commission said.
The panel also called for increasing fines for some traffic violations by $50 and adding a $100 surcharge to vehicle offenses that result in points against a driver's license.
All of the money would be used to improve roads and bridges and other transportation modes and shore up the state's ailing public transit agencies. The commission has estimated that the annual cost to a typical motorist would be $36 in the first year and $132 by the fifth year.
First Published January 18, 2013 12:00 am