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Taxing Big Oil's Windfall Profits

Stop the presses.  Instead of receiving ridiculous tax breaks and taking home obscene amounts of money tax-free, big oil may actually be asked to pay its fair share of taxes for once.

This week, Wisconsin Governor Jim Doyle proposed taxing big oil companies to help pay for the state's transportation needs. 

  • The assessment would equal $1.50 per barrel of oil sold in the state, and more importantly, the companies would be prohibited from passing the tax onto customers by raising the price of gas at the pump. 
  • The Wisconsin Department of Revenue would have the authority to audit the earnings of oil companies. 
  • If the department finds that the tax is resulting in higher fuel prices, the offending company would be subject to fines in the amount of the gains resulting from the price increase, or up to six months in jail.

Governor Doyle is not alone in his idea: 

  • The idea got traction last year when legislators in Washington State, supported by the advocacy of the Economic Opportunity Institute, proposed legislation to tax the oil company's windfall profits.  This session, Rep. Bob Hasegawa, D-Seattle, Steve Conway, D-Tacoma and Mary Helen Roberts, D-Edmonds, have sponsored HB 1510 calling for using $600 a year in oil profits to held mitigate energy costs for state residents and help fund state investments in renewable energy.
  • Pennsylvania Governor Ed Rendell is also proposing taxing oil company profits to help fill the state's transportation gap. His proposal would tax oil company businesses operating in the state at a rate of 6.17 percent on gross profits, providing $760 million a year for public transit systems.  Governor Rendell pointed out that Exxon Mobil's 2006 profit of $39.5 billion was almost 50 percent greater than the entire Pennsylvania state budget. 
  • Similar proposals are also being debated in New York and New Jersey.

Our January dispatch highlighted the use of taxing windfall oil profits as a fair means of offsetting the many environmental costs of fossil fuel use.  With these windfall profit tax proposals, big oil profits could help pay for public transportation, which would help mitigate some of the damage that is caused by fossil fuels.

With President Bush last year rejecting taxing oil profits and a federal bill not likely to get anywhere with a veto threat, it's left to the states to lead the way and help their citizens, rather than letting big oil take us all for a ride.

 

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