A Tax By Any Other Name is a Price Control

By May 17, 2007Energy

Governor Jim Doyle of Wisconsin apparently took umbrage at the Wisconsin Policy Research Institute for a recent analysis (reported here) that shot holes in his plan to tax “big oil” and make it a crime to pass on the tax increases to the consumer.

Responding this week, WPRI analyst George Lightbourn makes the obvious point — Governor Doyle’s strategy, his proposed mechanism, is tantamount to price controls. And price controls don’t work.

What was absent in the governor’s explanation was how he plans to keep the tax from showing up at the pump. If he can somehow manage to keep it off the pump price, he will have pulled off a miracle.

The same thing has been tried by Presidents Nixon and Carter, as well as a few governors over the years. Every attempt government has made to control the price of gasoline has ended in failure.

Last year, Hawaii dropped its price control after just eight months when it was discovered that all they had accomplished was to increase the price of gasoline.

Manufacturers are keenly interested in infrastructure, especially given the incredible amounts of investment our global competitors are making in roads, airports, ports and other essential infrastructure. But populist bashing of “big oil” is, if anything, a distraction from addressing those serious issues. Lightbourn is right when he concludes,

The no-pass-through provision with its promise of jailed oil company executives and cheap gasoline has no place in a serious discussion of transportation finance.

If the governor and the Legislature have a case to present for additional transportation funding, then they should make that case honestly. No matter how much we all might want to stick it to big oil, we now understand that the new tax will fall on consumers.

Let’s stop hiding behind the flimsy veil of a no-pass-through provision and get the real issues out in the open.