Experts say protecting drivers from gas price increases at the pump is the challenge.

They also say state officials probably can’t stop oil companies from dipping into your pocket to cover the costs of a gas tax proposed by Gov. Jim Doyle.
The state can tax gasoline brought into the state, as Doyle proposed in his budget last week. But it’s unlikely the governor can follow through on his promise to prevent oil companies from passing the tax along to consumers by raising prices at the pump, said economists and others familiar with the industry. Doyle wants to hire a team of auditors to help enforce a proposed law that would fine, and possibly jail, oil companies or executives who passed the tax on to consumers.

But experts were skeptical whether state auditors could prove that rising gas prices reflected the costs of the tax, as opposed to some other factor in a complex global market. The issue comes as some Republican lawmakers question whether the measure could mean consumers pay up to 5 cents a gallon more at the pump.

“I guess that to me this is symbolic politics. I don’t see it as being a really practical solution to the problem of a highly concentrated oil and gas industry,” said UW-Madison law professor Peter Carsten-sen, a Doyle supporter who’s critical of oil companies but skeptical of the governor’s proposal.

Doyle said last week the tax was needed to help pay for much needed investments in the state’s roads and to respond to what he said were the unfair profits that oil companies have made at the expense of consumers in recent years.

“Now in transportation we face a real issue about how we fund the infrastructure of the state,” said Doyle, adding he preferred trying to lay at least part of the bill at the feet of the oil companies. “To me, that’s the better choice.“

The tax, which would generate about $272 million over two years, has drawn support from Democrats who control the Senate and skepticism, but so far not rejection, from Republicans who control the Assembly. Two powerful lobbies have an interest in the bill — road builders Wisconsin Transportation Builders Association, which supports the tax, and the petroleum industry which opposes it.

To defend the legality of the proposal, the Doyle administration pointed to a unanimous Supreme Court decision in 1988 that found that federal law did not pre-empt Puerto Rico’s ability to tax oil refiners and prohibit them from passing the tax along to consumers.

“We feel that the law is settled in this area and very solid,” Department of Administration Secretary Michael Morgan said Friday.

Erin Roth, executive director of the oil lobby Wisconsin Petroleum Council, said he didn’t believe that the Puerto Rico case was an “apples to apples” comparison with Doyle’s proposal, which he called unprecedented action in Wisconsin against a single industry.

Roth said that about 2.8 billion gallons of gasoline and diesel were delivered to the state last year, mostly by companies with long-term profits that are similar to those of other industries. Some of a tax increase here would be borne by consumers in Wisconsin or other states, he said.

Senate Minority Leader Scott Fitzgerald, R-Juneau, has criticized the tax, saying it could add as much 5 cents per gallon for consumers at the pump.

Morgan, a former secretary of the Department of Revenue, said a 2.5 percent tax would essentially be applied to gasoline being sold or brought into the state by suppliers.

The state would hire four auditors who would try to ensure that the costs aren’t being passed along, he said.

“We (would) review books and records, pricing, market data to verify that the assessment has not been passed on,” Morgan said.

Carstensen, who specializes in the regulation of energy companies, said didn’t know whether the state’s plan would be found constitutional.

“It becomes a field day for lawyers,” he said of the possibly lengthy court battle. “By that time we’ll all run out of petroleum anyway."

Doyle aides pointed to their own expert, Mark Cooper, director of research for the Consumer Federation of America. But even Cooper, a supporter of the tax, said he wasn’t sure that Doyle could prevent costs being passed on to consumers.

“The information that would be needed to make the case seems to me to be overwhelmingly difficult to gather,” said David Weimer, a public affairs professor at UW-Madison who has worked in oil regulation at the U.S. Department of Energy.

“You have a couple people in a little department of revenue that are supposed to figure out the finances”

of huge global companies, said Todd Berry, president of the Wisconsin Taxpayers Alliance and a former state revenue official. “You’re asking an awful lot of auditors.”

Jason Stein is a reporter for the Wisconsin State Journal.

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