Progressive group says oil tax would work

by Damon Boughamer
Public Radio Capitol News, serving Pennsylvania

Harrisburg, Penna. (PRCN, 25 May 2007) - A proposed new state tax on national oil company profits has been attacked by Republicans, who say it's impractical, possibly illegal and likely to result in higher gas prices.

A report from a progressive think tank suggests none of those fears are accurate.

The Pennsylvania Budget and Policy Center says the "gross profits tax" would be a "good funding source" for Pennsylvania's public transit systems.

The 6.17 percent levy on the percentage of profits derived from a firm's Pennsylvania business would relieve the company from paying corporate net income tax, but the total tax paid would be much higher.

Researcher Sharon Ward says world demand for oil is so high right now - and refining capacity so low - that oil company profits will remain high and absorb the impact of any change to Pennsylvania law.

"Some lawmakers are concerned that the tax will translate into higher prices at the pump. The issue is much more complex than the discussion has been to date. We use what we believe is a more economically sound model. We think that the bulk of the tax, perhaps as much as 90
percent, will be paid by shareholders, not drivers," Ward says.

So far, the oil profits tax has attracted few fans in the legislature, but many mass transit systems have cut or are cutting service, so some kind of action is expected this summer.