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Reality Check: Doyle's Tax On Big Oil Companies

Published On: Feb 14 2007 05:40:31 AM CST
Updated On: Feb 14 2007 05:43:43 AM CST

Gov. Jim Doyle is trying to balance the budget in part with a new tax on big oil companies, but opponents said the money will just come out of taxpayers' pockets.

WISC-TV political reporter Colin Benedict put Doyle's plan through a "Reality Check."

Doyle said his plan is to tax the oil companies and not Wisconsin residents, but the key to it all is whether he can stop them from passing the bill on to taxpayers.

"I believe Wisconsin consumers deserve a refund on what they've overpaid, and I've found a way to give it to them," Doyle said on Tuesday during his budget address.

A WISC-TV analysis found that "needs clarification."

The governor's plan is to tax 2.5 percent of every barrel of oil to be used in Wisconsin. It would bring in $270 million for the budget.

Doyle said Wisconsin customers have been gouged.

"They've overpaid," Doyle said.

Last year, the top five oil companies combined made $113 billion. This tax would not apply to ethanol or biodiesel producers.

"It would be illegal for them to pass the fee on to consumers ? with criminal penalties if they break the law," Doyle said.

This also "needs clarification."

No one doubts the state can tax oil companies. But there is a question of whether the companies can be forced not to pass the tax on to customers at the pump.

Doyle said a 1988 U.S. Supreme Court ruling allowed Puerto Rico to prohibit oil companies from passing on the tax to customers and allows Wisconsin to do the same.

But can violators be caught?

The governor is adding four new revenue auditors to look over this tax and the cigarette tax enforcement. If caught, violators would have to pay what they owe or go to jail for six months.

This isn't a new idea. In 1980, President Jimmy Carter started a similar "windfall tax" for oil companies. It was repealed under President Ronald Reagan.

A spokesman for Exxon Mobil said "it was a bad idea then, and it's a bad idea now."

A federal study done after the 1980s windfall tax showed that America's dependence on foreign oil increased and the money spent on research and development decreased.

Something similar was also proposed by former Gov. Tommy Thompson in 1995. It never passed because many, including Democrat Spencer Black, said, "If you tax them, they're just going to pass this right on."

Although it's worth noting that Thompson's plan didn't include Doyle's proposed enforcement and penalties.

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