Pa. gasoline tax may soon be highest in U.S.
Gov. Tom Corbett struck a populist note in this week's budget address, saying lifting the Oil Company Franchise Tax cap would force oil and gas companies to "pay their fair share." But the increase will likely be passed on to consumers at the pump and may make Pennsylvania gasoline the most heavily taxed in the nation.
As levied now, the tax is about nine percent of the price of a gallon of gas, but calculated on a maximum price of $1.25 per gallon, yielding about 20.3 cents. By gradually lifting that cap over time to reflect actual gas prices - already more than double the cap - the amount of the tax paid per gallon could more than double.
Gov. Corbett tried to soften the blow by cutting another state tax on fuel, the excise tax, from 12 cents down to 10 cents.
That could be cold comfort for consumers.
With the cap on the other tax fully lifted, Pennsylvania would become home to the most highly taxed gasoline in the nation, with a total of 75.2 cents of taxes on each gallon. Under a current state-by-state taxation comparison compiled by the American Petroleum Institute, the most taxed gasoline is sold in New York, at 69 cents per gallon. The national average, according the API, is about 49 cents.
"Pennsylvania gasoline would be more than twice that of many states," said Rayola Dougher, economist with the institute.
Contrary to Corbett's claim that lifting the cap would force gas merchants to pay more, Dougher said the oil franchise tax, like other taxes, gets passed down to the consumer.
The local economy runs on gasoline and diesel, said Chris Jordan, an officer of the Northeast Chapter of the Pennsylvania Motor Truck Association. He rattled off a list of the industrial parks in the Wilkes-Barre and Scranton areas, all filled with warehouses, distribution centers or manufacturers taking deliveries or sending out goods - on trucks.
If Pennsylvania secures the distinction of having the highest-taxed gasoline, he said companies with options would choose to move freight through another distribution center in another state. That could shift the money, economic activity and jobs elsewhere, said Jordan, branch manager of Service Tire Truck Center in Jessup, which services trucks.
"You have trucks in and out of these parks all day, so it will affect a lot of people," he said.
The impact of more expensive gas on tourism may be mixed, said David West, vice president of marketing for the Pocono Mountain Visitors Bureau.
The Poconos, which draws most of guests from driving distance, does OK during spikes in gasoline prices because the New York and Philadelphia market want to stay closer to home. When gas prices are high, people tend to extend their stay and make the most of a vacation destination after using up a tank of gas to get there.
The downside may be on the in-state attraction and tourism service companies who will see their gas costs increase, West said. It will add to the cost of doing business, particularly for bus companies.
"There will be a wave of increased cost, but it's difficult to know what it will translate into," he said.
Something needs to be done to repair Pennsylvania's roadways and bridges, said Craig Smith, a spokesman for AAA North Penn. The group is not opposed to the tax, because it is earmarked for road and bridge work.
"There are no great choices for rebuilding our infrastructure," Smith said. "We have to maintain the quality of our roads, because bad roads hurt our entire quality of life."
The tax would raise $1.8 billion by the fifth year of the plan.