I simply cannot imagine any way that such a tax would not be passed on by the oil companies, at least indirectly, as a part of the “cost of doing business” that goes into the calculation of prices.

Gov. Jim Doyle will unveil a tax on oil companies on Tuesday but will bar the firms from passing it on to consumers.

The tax would mark the first cash infusion into the state's transportation account since an annual automatic increase in the gas tax ended in April.
But some question whether the state can legally prevent companies from passing taxes on to consumers.

In my eyes, it isnÂ’t even a question of legality. Prices are set, in any situation, in light of the full cost of doing business. Taxes are a part of that cost, so when prices are set in the state of Wisconsin that additional margin will simply be factored in. Indeed, short of limiting the legal amount of profit the companies make (a virtual impossibility when we are dealing with a multi-national industry), there is no way to impose such limits.

And, of course, if they do try to impose such limits and penalties upon the oil companies doing business in the state of Wisconsin, there is always one other option available to the oil companies – they can withdraw from the market, and the state of Wisconsin can become a pre-industrial society on a par with Amish country. Maybe Gov. Doyle needs to learn the same lessons as Hugo Chavez about the limits of the government’s control over the economy.

Posted by: Greg at 10:45 AM | No Comments | Add Comment
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