There’s a certain brilliance to Gov. Tom Corbett’s transportation funding proposal, which would raise $5.4 billion in new revenue with something that is technically not a tax increase even though it walks, swims and quacks like one. On top of that, the governor’s plan to uncap the Oil Company Franchise Tax defies any precise forecast of what it will wind up costing drivers. That will depend on how gasoline prices fluctuate and how much added cost gasoline wholesalers will swallow rather than passing it along to the driving public.
None of that is going to stop us from offering an assessment of the impact, though. If a furry critter from the backwoods of Pennsylvania can get away with telling us spring is just around the corner while it’s snowing sideways, we can make a semi-educated guess as to what Mr. Corbett’s plan will cost a typical driver.
Warning: There will be math.
The tax on gasoline at the wholesale level is 153.5 mills but it is only applied to $1.25 per gallon of the actual price. (Wouldn’t it be nice if, say, the sales tax on a new car only applied to the first $5,000 of the purchase price?) Uncapping the OCFT would apply the tax to the full “average wholesale price,” which is calculated by the state Revenue Department based on last year’s prices, announced in December, and stays in effect for the entire following calendar year. This year’s magic number is $3.114 per gallon.
Mr. Corbett proposes lifting only one-third of the cap this year, and the rest in 2015 and 2017. For now, the cap is protecting $1.864 per gallon from taxation; tearing out a third of this tax shelter would subject another 62.1 cents of the wholesale price to the tax. That means 9.6 cents per gallon more (in this game, the rules say we always round up to the nearest tenth of a cent).
For a typical driver (12,000 miles in a 24 mpg vehicle), this translates into a $48 annual increase — but only if the wholesalers pass the full cost on. Some experts think they will absorb at least some of the increase, or maybe even raise prices someplace else (I vote Ohio) to recover the money.
But wait! More math is needed! The governor also wants to roll back the tax paid by drivers at the pump, currently 12 cents per gallon, by a penny. That knocks $5 off the annual impact on Average Motorist, bringing it down to $43.
That’s $43 toward better roads and bridges, solvent transit systems and improvements to rail, airports and trails. That’s less than the cost of a couple cases of beer or 15 minutes in front of a slot machine. And bear in mind, that’s the worst-case scenario.
What will happen in 2015 and 2017 when the rest of the cap would be removed? It’s not even worth hazarding a guess. Pump prices have fluctuated by 60 cents just in the past year. If you know what the price of gas will be in 2015 and 2017, I’ll start listening to your spring weather forecasts and tune out the groundhog.
Feel free to print this out and keep it handy for the next time someone screams bloody murder about the cost of the governor’s plan. We learned this week that traffic congestion is costing each of us $800 a year in wasted time and fuel, and bad roads another $373 in repair costs. The governor’s plan looks like a bargain.