Pennsylvania Plan Would Get Oil Companies to Help Foot Infrastructure Bill

Pennsylvania Gov. Tom Corbett this week introduced a plan to week that would rely on a tax of oil companies to inject billions of dollars into the state’s transportation system, including for road and bridge work, by cutting taxes on fuel at the pump, while a proposal backed Virginia Gov. Bob McDonnell for road and other transportation needs has been defeated.<!stop>

“I am proposing two adjustments to the way we provide for our transportation needs,” Corbett says in a release. “I am calling on the legislature to pass a 17% reduction in the flat liquid fuels tax paid by consumers at the pump. Second, I am asking the General Assembly to begin a five-year phase-out of an artificial and outdated cap on the tax paid by oil and gas companies on the wholesale price of gasoline; it is time for the oil and gas industry to pay their fair share of the cost of the infrastructure supporting their industry.”

The Oil Company Franchise Tax is levied by the state on wholesale oil distributors based on the wholesale price of gasoline. By gradually eliminating the cap of $1.25, which was put in place in the early 80s, Pennsylvania expects to realize approximately $1.8 billion by the fifth year of the plan. The wholesale price of gasoline reached the $1.25 ceiling in 2006, so funding from the OCFT has not grown since. It’s estimated that lifting this cap would result in close to a 30 cents per gallon fuel tax hike over a five-year period, despite cutting fuel taxes consumers pay at the pumps.

The plan closely follows the recommendations outlined by Corbett’s Transportation Funding Advisory Commission, encompassing customer service enhancements and cost reductions, implementing a multi-modal development strategy, transit improvements and efficiencies, enhancing local roads and bridges, advancing safety and technology, and improving Pennsylvania DOT business practices.

Corbett has received some criticism for the plan, since he campaigned on a platform not to raise taxes. He says his proposal is not an increase, but is rather merely the lifting of "an artificial and outdated cap" on a wholesale tax paid by oil and gas companies.

Together, the changes would result in an 82% increase in the state fuel tax by 2018. In a statement, the governor’s office says the number of roads in poor condition in the Keystone State has risen from fewer than 7,500 miles in 2007 to more than 9,200 miles in 2011.

The proposal would also replace Pennsylvania’s current annual vehicle registrations with a two-year registration and the current four-year driver’s license with a six-year license as well as encouraging public-private partnerships for transportation projects, which can often result in tolls.

Just to the south in Virginia, an ambitious $3.1 billion dollar transportation funding plan backed by Gov. Bob McDonnell died in the state Senate this week after passing the House. It called for eliminating the state’s gasoline tax at the pumps and replacing it with higher sales taxes. Removing the 17.5 cents a gallon tax on diesel was not part of the plan.

The move came as the General Assembly is set to end its current session in three weeks. There is a possibility that the Senate could approve a separate House passed legislation that would result in a smaller amount of funding, but published reports indicate the governor is not optimistic about the chances of it getting a thumbs-up.