Governor Tony Evers wants to increase the gas tax on Wisconsin consumers by $0.08 a gallon. The good news is that the governor estimates that this tax increase will generate approximately $485 million in new revenue over the two year budget cycle – money that the state can spend on fixing Wisconsin’s roads. The bad news, of course, is that Wisconsin consumers will be out $485 million that they could have spent on other things.
But wait! The governor says that the bad news is really good news. That’s because in consideration of the proposed increase in the gas tax, he is also going to propose repealing Wisconsin’s Unfair Sales Act – the minimum markup law – as it applies to gasoline. The governor says that his budget will “repeal a hidden tax that costs you $0.14 a gallon on gas.” So, he says, if his budget is adopted Wisconsin consumers will actually pay less at the pump than they do right now. The good news is that there is no bad news at all!
A few reality-based thoughts.
If the governor’s math is right, he is suggesting that if nothing is done about the minimum markup law Wisconsin consumers will be paying a hidden tax of around $850 million over the next two years. And that Wisconsin consumers have been paying millions of dollars in hidden taxes over the many years the minimum markup law has been in effect. But the state hasn’t been getting this money. Who are the hidden tax collectors?
We at the Wisconsin Institute for Law & Liberty (WILL) have said for years that the effect of the law is mostly that Wisconsin consumers pay more for gas (and other products) than they would pay in a competitive market with no minimum markup requirement. The hidden tax collectors are in fact the retailers, distributors and manufacturers who can charge higher prices and do not have to deal with vigorous competition in the markets where they operate. Why are we paying them? No good reason, and we are pleased the governor apparently agrees with us on the pernicious effects of the minimum markup law.
Supporters of the minimum markup law have argued that it is intended to protect small businesses from predatory conduct by larger firms. And that Wisconsin consumers benefit from having a large number of small firms in all markets that might be affected by the law. We at WILL have already shown that this is not true. The presence of the minimum markup law appears to have no effect at all on the number of small businesses or gasoline stations in Wisconsin. There is no need to protect small businesses by forcing Wisconsin consumers to pay higher prices than they would pay in a freely competitive market.
It is gratifying that the governor must agree with WILL. Surely he would not propose eliminating the hidden minimum markup tax on gasoline if he believed that the law benefits Wisconsin consumers in some important way. It is of course unfortunate that he thinks that citizens should pay the price of eliminating the minimum markup tax by having their actual taxes raised. One does not follow from the other. If Wisconsin citizens have been paying hidden taxes for many years and for no important purpose, the governor should favor eliminating the hidden tax. Period. Whether the gas taxes actually paid to the government should be increased is a different and unrelated question.
And finally, if Wisconsin consumers are paying a hidden tax on gasoline, they are paying hidden taxes as well on everything else that they buy. The Unfair Sales Act is not limited to gasoline, but covers almost every consumer product in one way or another. We at WILL have argued for years that this anticompetitive and protectionist law ought simply to be repealed. We hope the governor will follow his reasoning to its logical conclusion and propose the repeal of any hidden and useless taxes on Wisconsin citizens. All of them.
Mike Fischer is Senior Counsel with the Wisconsin Institute for Law & Liberty.