Hawaii, Wisconsin Consider Petroleum Tax Hikes

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Hawaii, Wisconsin Consider Petroleum Tax Hikes

HONOLULU & MADISON, Wis. -- Looking for money to finance renewable energy and agriculture safety, Hawaii state lawmakers plan to increase a per-barrel tax on petroleum products sold by distributors, which is likely to mean a hike in gasoline retails of a few cents per gallon, according to a report in the Honolulu Advertiser.

The barrel tax, which is now collected to help the state respond to oil spills, would increase from 5 cents per barrel to $1.05. The $1 hike could generate $31 million a year, the newspaper reported. When passed on to consumers, the tax could mean a price hike of 2 to 3 cents per gallon.

"It's a tax that really could be called an investment and viewed as an economic stimulus for us because it puts money where we need it most, in our energy and food infrastructure," said State Rep. Hermina Morita. "One of our biggest problems right now, especially in a down economy and with the general fund, is that both food and energy are long-term strategies to lessen our dependence on imports. In order to make this kind of transformation, we need dedicated funding."

The bill would create a Hawaii Economic Development Task Force to back public and private renewable energy and food security programs, including Gov. Linda Lingle's clean energy initiative, which has set a goal of having 70 percent of the state's energy produced by renewable sources by 2030, the newspaper reported.

Clean energy is one of the governor's priorities, but the administration has opposed the barrel tax increase because it would be passed onto consumers during a recession, the newspaper stated. The administration also has questioned the need for a task force, since there is already consensus that the state has to move toward alternative energy.

Linda Smith, the governor's senior policy adviser, told lawmakers in testimony last month that the administration "opposes any measure that increases the cost of living for Hawaii residents."

The environmental response tax, known commonly as the barrel tax, was established in 1993 and applies to petroleum products sold by distributors to retail dealers and end users. The money collected from the tax can be used by the state for oil-spill prevention, county used-oil recycling programs and energy security. The money can also be directed toward environmental protection, including issues related to air and water quality and global warming.

Under the bill, the tax would be renamed the environmental response, energy and food security tax, to reflect its expanded scope. The bill, for example, would provide money for pest inspection to help contain threats such as the varroa mite, which attacks honey bees, along with money for food safety, livestock revitalization and water pipelines for agriculture, according to the report.

State Rep. Isaac Choy, an accountant and former chairman of the state's Tax Review Commission, told the newspaper consumers would only face a few cents per gallon in higher gas prices in return for the potential development of renewable energy and food security programs. "I think that's a great deal," he said. "It's well worth it."

Meanwhile, in Wisconsin, a proposed tax on oil companies that do business in the state has been the source of controversy, according to The Spectator.

Gov. Jim Doyle's 2009-11 budget proposes taxing oil companies' profits and includes a provision that would prevent the companies from passing the tax onto consumers. The revenue would be used for transportation needs, such as roadwork. But opponents of the tax say it will be legally challenged and will hurt small businesses around the state.

According to the Wisconsin Petroleum Marketers and Convenience Store Association (WPMCA), the anti-pass-through provision would violate the U.S. Constitution's Interstate Commerce Clause. Similar provisions have been proposed in other states, including New York, but have been found to be unconstitutional.

"In theory, [taxing big oil companies] sounds great. Let's make big oil companies pay for privilege of doing business in Wisconsin," Pam Christenson, director of public affairs for the WPMCA, told the newspaper, "but everybody knows big oil will pass the tax onto small businesses in Wisconsin."

As an alternative revenue source, the WPMCA has lobbied for a flat 3-cent state gas tax increase. Despite promising not to raise Wisconsin's gas tax in his 2006 gubernatorial re-election bid, Doyle has not ruled out a hike as an option, the newspaper reported.

Christenson said Doyle's proposal would cause the tax on consumers to move up and down with gas prices if the provision was challenged. The 3-cent hike would be a safer and more consistent route for the state, she told the newspaper. Christenson also said Doyle's proposal would cause oil companies to divert fuel to other states, which would result in supply issues and store closures.

Wisconsin's gas tax is one of the highest in the country at 32.9 cents a gallon, according to the state Department of Transportation

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