A proposed tax on oil companies that do business in Wisconsin has been the cause of some recent controversy.

Gov. Jim Doyle’s 2009-11 budget has proposed taxing oil companies’ profits and includes a provision that would prevent the companies from passing the tax onto consumers. The revenue would be used for transportation needs, such as roadwork. But opponents of the tax say it will be legally challenged and will hurt small businesses around the state.

According to the Wisconsin Petroleum Marketers and Convenience Store Association, the anti-pass through provision would violate the U.S. Constitution’s Interstate Commerce Clause. Similar provisions have been proposed in other states, including New York, but have been found to be unconstitutional.

“In theory, (taxing big oil companies) sounds great, let’s make big oil companies pay for privilege of doing business in Wisconsin,” said Pam Christenson, director of public affairs for the WPMCA, “but everybody knows big oil will pass the tax onto small businesses in Wisconsin.”

As an alternative revenue source, the WPMCA has lobbied for a flat 3-cent state gas tax increase. Despite promising not to raise Wisconsin’s gas tax in his 2006 gubernatorial re-election bid, Doyle has not ruled out a hike as an option.

Christenson said Doyle’s proposal would cause the tax on consumers to move up and down with gas prices if the provision was challenged. The 3-cent hike would be a safer and more consistent route for the state, she added. Christenson also said Doyle’s proposal would cause oil companies to divert fuel to other states, which would result in supply issues and store closures.

“We know how to collect it and it won’t be legally challenged,” she said. “If the tax is upheld in court, companies will just choose not to send gas to Wisconsin because it will cost them more money.”

Wisconsin’s gas tax is one of the highest in the country at 32.9 cents a gallon, according to the state Department of Transportation. However, Sen. Kathleen Vinehout (D-Alma) said the state has relatively lower fees compared to other states.

“Historically, Wisconsin has been more likely to pass broad-based taxes rather than fees,” she said. “What other states have done is put the cost of transportation into related fees, like vehicle registration and title transfers.”

Vinehout said this can be advantageous because it allows Wisconsin to collect revenue from drivers from other states.

“In some respects it is wiser to broaden the base so that people who are driving through Wisconsin end up paying for the cost of keeping up the roads as well as the people of Wisconsin,” she said.

Vinehout said she has concerns about passing through the provision and is looking into both sides of the debate before making a decision to support or reject the proposal.

“Part of my concern is whether or not the tax is going to be passed on and how it is going to hurt local convenience stores and co-ops,” she said. “At this point I’m getting conflicting information from both sides, so I’m continuing to do research to find out what the best alternatives might be.”