Pennsylvania May Get Oil Company Tax Under Rendell Road-Repair Proposals

Pennsylvania Governor Ed Rendell proposed taxing oil companies and increasing motor-vehicle fees to generate an additional $1 billion annually for transportation infrastructure.

Oil companies do about $5 billion in business each year in the state while paying some $35 million in taxes, less than their fair share, Rendell, a 66-year-old Democrat, said today. A Republican spokesman said Rendell’s proposed tax is unlikely to pass, and might be unconstitutional.

Profits of oil companies doing business in the state would be taxed 8 percent under the proposal, bringing in about $576 million during the first full fiscal year. Motor vehicle fees, some of which haven’t been increased in decades, would be adjusted to reflect the rate of inflation, Rendell said in a press conference in Harrisburg, the capital.

Transportation funding is “one of the most important and immediate challenges facing the commonwealth,” said Rendell, who is serving his final year in office. “We all know that we’ve averted tragedy by happenstance here in Pennsylvania. We can’t endanger public safety any longer. We cannot wait another month before we get to work on these projects.”

Pennsylvania has 5,646 state-owned structurally deficient bridges, the most of any U.S. state, and more than 10,000 miles of roads in need of repair, according to a statement announcing the plan.

Scaling back

On Aug. 12, the Pennsylvania Transportation Commission, which sets transportation priorities for the state with the fifth-largest road network, cut its planned expenditure for the next 12 years from $67.9 billion to $51.6 billion, citing questions about federal funding, inflation and the lack of additional resources.

The state spent $3.9 billion on highways, bridges and transit in 2009, aided in part by $1 billion in federal stimulus funds, said Erin Waters, a spokeswoman for the Pennsylvania Department of Transportation. The state needs an additional $3.5 billion in annual funding to maintain infrastructure, according to a May report by the Transportation Advisory Committee, which was established in 1970 to help determine the state’s needs.

Oil companies operating in Pennsylvania avoid most corporate income tax because their accounting credits profit to parent firms based in other states, Rendell said.

Under the proposal, the companies would be exempt from the 9.99 percent corporate net income tax. They would be barred by law from passing the new tax on to consumers at the pump, he said. The proposal would allocate money to the Attorney General’s office and the Department of Revenue to enforce the tax though audits.

33 Cents

Motor-vehicle fee increases would cost the typical Pennsylvania driver approximately 33 cents a week, Rendell said. That would add almost $434,000 to the motor license fund, according to calculations by the governor’s office sent in an e- mail from a spokesman, Gary Tuma.

The proposal may create as many as 40,000 “good-paying” jobs in the sixth-most-populous U.S. state, Rendell said. The General Assembly may vote on the measure in coming months.

A spokesman for Senate Majority Leader Dominic Pileggi, a Republican, said such a tax would be unworkable and unpassable.

“The specific plan to tax oil company profits -- and somehow prohibiting the companies from passing that cost on to Pennsylvania consumers -- has serious constitutional issues under the Commerce Clause,” said Erik Arneson, the spokesman. “At best, we would face years of litigation before seeing any possible revenue from that scheme.”

He said that the plan would likely die in the Senate.

House Republicans favor exploring public-private partnerships and greater contributions from local governments and users before turning to taxes and increased fees, said Steve Miskin, spokesman for the House Republican Caucus.

To contact the reporter on this story: Esmé E. Deprez in New York at edeprez@bloomberg.net

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