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Rendell Looks to Raise Taxes on Oil Companies in Pennsylvania

2 min readBy: Jonathan Williams

While Governor Ed Rendell of Pennsylvania opposes raising the state’s excise taxAn excise tax is a tax imposed on a specific good or activity. Excise taxes are commonly levied on cigarettes, alcoholic beverages, soda, gasoline, insurance premiums, amusement activities, and betting, and typically make up a relatively small and volatile portion of state and local and, to a lesser extent, federal tax collections. on gasoline to improve roadways, he has suggested the possibility of increasing taxes on oil companies to generate funds for road needs. From State TaxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. Today:

“Pennsylvania Gov. Ed Rendell (D) says he opposes an increase in the state gasoline tax to help raise the $866 million to $2 billion his own blue-ribbon commission estimates is needed to maintain roads and bridges and bail out mass transit agencies in Philadelphia and Pittsburgh.

Rendell, in the middle of a campaign for reelection, would not say how he would come up with the cash called for by the Pennsylvania Transportation and Funding Reform Commission. He said the state has always found a way to “stretch highway dollars” and would continue to do so, though he acknowledged that it is unrealistic to believe the transportation needs can be met without additional funding sources.

The only possibility Rendell suggested was an increase in the state franchise tax for oil companies.

The commission’s interim report, released August 23, found that the state needs $866 million a year in new funding just to maintain the status quo in roads and transit, and up to $2.2 billion a year in new funding to improve the state’s transportation system.”

Today, the American Petroleum Institute estimates motorists in Pennsylvania pay an average gasoline tax of 50.7 cents for every gallon of gasoline and 63.6 cents per gallon of diesel fuel – both tax rates rank in the top 10 nationally. Included in these rates is the state’s franchise tax on oil companies which increased to 19.2 cents per gallon of gasoline and 26.1 cents per gallon on diesel as of January 2006.

Governor Rendell is wise to consider stretching current highway dollars before raising Pennsylvania’s gasoline taxes. However, an issue that is neglected in the debate is the amount of Pennsylvania’s federal gasoline tax dollars that are “earmarked” for projects that are many times low-priority, often politically motivated and sometimes marginally related to roads.

For instance, according to Taxpayers for Common Sense, the 2005 highway bill spent $706,691,502 of Pennsylvania’s federal transportation funds on 423 earmarked projects. (see full list here). That amounts to $2,812 of federally earmarked gasoline tax dollars per lane mile of highways in Pennsylvania.

Included in the laundry list of earmarked transportation “pork” is $1.6 million for construction of the Montour Trail, Great Allegheny Passage, $600,000 to complete gaps in the Pittsburgh Riverfront Trail Network and over $4 million for projects at the Philadelphia Zoo – including pedestrian walkways and landscape improvements to surface parking lots.

It’s no wonder many of Pennsylvania’s roads are in dire need of repair when gasoline tax dollars –that are designed to build and maintain roadways – are being used to fund zoos and bike paths.