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Pennsylvania Governor Tom Corbett recently signed into law a transportation infrastructure spending plan (H.B. 1060) that will pump billions of dollars into the state’s transportation system, funded in part by phasing out a cap on the oil company franchise tax.

The Pennsylvania oil company franchise tax imposes a 15.35 percent tax on the average wholesale price per gallon of liquid fuels. However, only the first $1.25 of the average wholesale price per gallon of liquid fuels was subject to the tax. This bill phases out such cap over a five-year period.

 

Effective January 1, 2014, the $1.25-per-gallon-cap will increase to $1.87 per gallon. Effective January 1, 2015, the per-gallon-cap will increase to $2.49. After December 31, 2016, the average wholesale price per gallon of liquid fuels shall be determined by the Pennsylvania Department of Revenue, provided that in no case will the average wholesale price be less than $2.99 per gallon.

It is anticipated that most, if not all, of the oil company franchise tax will be passed on to consumers. Rep. Matt Baker, who opposed the bill, stated in a news release that “the new taxes would cost motorists $5 more on an average tank of gas for a mid-sized car..., but could be more as the price of gas increases over time.”

 

Other funding sources for this bill include increases to certain fees and fines imposed on motorists, including increases in vehicle registration fees, driver's license fees and fines for traffic violations.

 

Click here to read the full text of this bill.

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