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N.C. Group: Corporate Gas Tax Rate Would Mean Paying Less At Pumps

Posted May 15, 2006

— As consumers grit their teeth with every trip to the pump, the high prices are even harder to swallow when oil companies report record profits.

But a proposal by one North Carolina advocacy group could have oil companies covering part of the cost of their record-setting success at the gas pumps.

"There's a clear correlation between those profits and prices that consumers are paying at the pump," said Rob Thompson, who leads North Carolina Public Interest Research Group.

Thompson's plan would force oil companies to pay for that profit. The corporate tax rate would climb for gas producers right along with the price. Money raised would go toward tax credits for people who buy energy-efficient vehicles.

The obvious question about the proposal: "What will stop oil companies from passing along that tax to consumers?'"

"The tax increases accelerate the higher the gas prices get," Thompson said. "So, we think that's a strong disincentive for them to pass on, raise prices."

So far, no state lawmakers have come forward to sponsor the proposed legislation.

"I would be very doubtful that this type proposal would go anywhere," said Rep. Nelson Dollar, R-Wake. "North Carolina needs to be lowering its marginal tax rates and needs to be lowering it's corporate tax rates."

Critics also worry that a windfall tax would be too complicated to enforce if oil company profits fluctuate at a different pace than gas prices.

Gov. Mike Easley is talking about freezing the state's gas tax as a way to help consumers with rising prices. In North Carolina, motorists pay about a 30-cent gas tax. The federal tax stands at 18 cents a gallon.

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