Taxing Big Oil's Windfall Profits

Thursday, February 15, 2007

Growing Economy

by J. Mijin Cha

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.

More Resources

Rewarding Work

by Adam Thompson

Making Legislative Pay Match the Workload

One of the most politically challenging, and politically assailable, decisions a legislator can make is a vote increasing legislative pay.  Yet, with legislative pay a mere pittance in most states, increasing it is necessary to prevent wealth from becoming a prerequisite to hold public office.

A new report by the Council of State Governments shows that legislator pay in 28 states has actually declined in the past 20 years when adjusted for inflation, and $9,230 is the median income for so called "part-time" legislators in 18 states.  In New Hampshire, $100 a year is all you get for spending more than half of your time writing laws.  New Hampshire may be the extreme, but 27 states pay legislators less than $20,000 a year. 

Inadequate pay prevents good people without means from running for office.  But addressing this problem requires a delicate political dance.  Some legislators are coming up with creative ideas to increase pay and avoid the political pitfalls.

  • Tie legislative compensation to personal income and financial need - A bill in Maine, LD 226, where legislators earn less than $11,500 each year, would develop a salary plan for legislators to ensure they can afford a "basic needs budget."  The goal is to ensure legislators are paid enough to cover household expenses including transportation, child care, health care insurance and other health expenses, clothing, food, personal care and recreation.  Legislators with incomes that meet the "basic needs budget" would not be entitled to a legislative salary.
  • Increase the pay of those that follow you - Many proposals, including the Maine bill, would not increase the pay for legislators that enacted the pay increase.  This can help address the political challenge of legislative pay increases.
  • Create an independent panel to set pay rates - A proposal in Oregon would put 6 registered voters on an existing panel to set pay rates for state elected officials and judges.  The voters would be placed on the Public Officials Compensation Commission through a lottery conducted by the Secretary of State.  At least 17 bills have been introduced in Indiana to increase legislative pay, including Senate Bill 401 which would require a similar commission to set pay rates and other benefit levels.
  • Put it to the voters - Voters in Missouri passed Amendment 7 which requires a two-thirds vote of the General Assembly to reject pay increases recommended by the Missouri Citizens' Commission on Compensation for Elected Officials.  The State Constitution requires this commission to set pay rates every two years.  Despite the voter approval, some lawmakers are opposing pay increases

According to a 2003 NCSL report, legislators in 37 states reported spending more than 60% of their time on legislative work.  Yet only nine states are full-time legislatures.  The rest are part-time and many are referred to as "citizen" legislatures.  To ensure a truly representative legislative body, pay must be in step with the times.

More Resources

Strengthening Communities

by Nathan Newman

Strengthening Home Rule on Revenue Powers

If states won't raise the revenue needed for local needs, the least they can do is let those cities and towns tax themselves.  At least that's the proposal by Massachusetts Governor Deval Patrick, who this week proposed eliminating some of the restrictions that prevent Boston and other towns from raising local revenue through sales taxes, meals taxes or many other fees that comparable cities use.  This proposal joins a slew of other proposals for expanding local revenue options:

  • The Indiana Association of Cities and Towns, along with police, firefighters and business allies, have proposed a Hometown Matters plan to give local governments new revenue options so they can ease the property tax burden locally.
  • In Georgia, a bipartisan proposal backed by a coalition of 15 chambers of commerce would allow two or more adjacent counties to ask voters to raise local sales taxes or create a local gasoline tax to fund multi-jurisdictional transportation improvements.
  • Montana legislators have proposed giving local cities and counties the right to vote on local sales taxes on lodging and meals.

These proposals have all run into stiff political opposition, but states might want to pay attention to a new report released in conjunction with the Massachusetts home rule proposal.  Limiting local revenue options also limits a range of planning tools based on tax incentives, creating, in the words of the report, "a competitive disadvantage at a time when all major cities are looking to deploy as many tools as possible in order to secure their economic future."  

The report links the limited home rule of the City of Boston to its lack of population growth, higher housing costs and underfunded public schools compared to other major cities with much stronger home rule powers-- a drag on economic development that more states should consider when they limit local home rule powers.

More Resources

Research Roundup

Research Roundup

A new Urban Institute study finds that while the State Children's Health Insurance Program (SCHIP) has signed up close to 70 percent of its target population, 1.8 million eligible children nationwide are still not enrolled and new federal funding is needed to meet that goal.

In From Bad to Good Jobs?, the Center on Wisconsin Strategy analyzes how the structure of career ladders in specific service industries are standing in the way of upward mobility for many Americans.  In a companion piece, Stronger Ladders, Stronger Floors, author Laura Dresser suggests that states need to do more than funding training programs; they need to strengthen the job quality of industry sectors to make sure the training translates into a decent job.

Policy Matters Ohio has laid out the principles for An Economy That Works, a blueprint for reviving Ohio's economy that focuses on strategic investments in universal pre-K and the state's whole education system, better infrastructure including internet access, energy independence, higher wage standards and a child care and health care system that includes everyone.

A Pew Charitable Trusts report finds that the prison population continues to grow, costing taxpayers an additional $27.5 billion in the next five years over and above what we are spending now.  Most effected will be Alaska, Arizona, Idaho, Montana and Vermont which, under current sentencing rules, can expect to see a one-third increase in prison populations by 2011.

Taxing Big Oil's Windfall Profits

WA House Bill 1510, Providing for the community reinvestment of oil windfall profits

Doyle Seeks to Tax Big Oil Firms

Pennsylvania Governor Plans Oil Profits Tax to Fund Transport

Progressive States Network, Raising Revenue Through Fair Tax Systems

Economic Opportunity Institute, Redirecting Windfalls for a Renewable Energy Future and a Sustainable Transportation Policy.

Making Legislative Pay Match the Workload - Legislators' pay falling behind

National Conference of State Legislators (NCSL) - What Happened to the "Citizen" in the "Citizen Legislature?"

NCSL -  Compensation Commissions  

WA - Panel OKs pay boosts for Washington elected officials

Strengthening Home Rule on Revenue Powers

Boston Foundation, Boston Bound: A Comparison of Boston's Legal Powers Compared with Six Other Major American Cities

Indiana Association of Cities and Towns, Hometown Matters

Eye on the Right

TX: Coal debate generates high-dollar ad campaigns

It seems the Astrodome isn't the only home for astroturf in Texas. The proposed construction of 16 new coal power plants has sparked an intense media campaign in the Lone Star State. Enter Texans for Affordable and Reliable Power, a PR-frim-run group headed by a local mayor whose family sold the power company TXU the land they hope to build on. The ads rival even last years "CO2: We Call it Life" campaign, ending on such talking point gems as "[generating] enough power to keep the monsters away."

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The Stateside Dispatch is written and edited by:

Nathan Newman, Policy Director
Mijin Cha, Policy Specialist
Adam Thompson, Policy Specialist
John Bacino, Communications Associate


Please shoot me an email at if you have feedback, tips, suggestions, criticisms, or nominations for any of our sidebar features.

John Bacino
Editor, Stateside Dispatch


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