If you think the big oil companies make unconscionable profits, you would like Connecticut.
Connecticut has just enacted a unique 2 percent tax on the gross revenues of major oil companies in the state. At least four oil companies are making plans to challenge the tax's constitutionality.
"The citizens of Connecticut have won a major victory over the seemingly never-ending greed of the oil industry," said William W. Winpisinger, head of the Machinists Union and president of the Citizen/Labor Energy Coalition, which first proposed the tax.
Anger at rising energy costs and animosity toward Big Oil fueled public support of the tax, but a number of legislators apparently gave it their blessing not so much out of prinicple as for lack of an alternative.
Gov. Ella Grasso incorporated the gross revenue tax in her budget in January. The Citizen/Labor Engery Coalition had been lobbying for it since last August.
The tax, which applies to all petroleum-derived products, is expected to raise $60 million a year from the 13 or 14 oil companies (no one is sure of the number) that will be affected when it takes effect July 1.
If the Connecticut tax is successful, other states are likely to copy it, and proposals already have been advanced in some states. In these lean years for governments trying to balance their budgets without outraging their citizens, a tax that falls only on an already generally unpopular industry is a wind fall that politicians elsewhere would find as difficult to resist as they did in Connecticut.
In New York, Gov. Hugh Carey has proposed a similar gross revenue tax, its proceeds to help fund mass transit.
In California, voters will decide June 2 whether they favor a 10 percent tax on big oil companies' profits to pay for mass transit. If this Proposition 11 passes, it would raise about $200 million a year from a total of 40 companies, a spokeswoman for the "Tax Big Oil Campaign" said Gov. Edmund G. (Jerry) Brown, Jr. has endorsed the measure and a March poll found that Californians support the tax 2 to 1.
But the Connecticut tax faces two stiff tests: First, is it constitutional?Second, can oil companies be prevented from passing the costs to their consumers, as they have vowed to try to do?
"If we can legally pass the coast to the consumers, we'll do it," a spokesman for Mobil Oil Corp. said.
Although the new law contains provisions intended to prevent the companies from passing on the tax, Thomas B. Coates, executive director of the Connecticut Petroleum Council, predicted it will amount to a hidden tax on Connecticut residents.
Former U.S. solicitor general Robert Bork has said it is "an absurd notion" that governments can raise oil companies' cost of doing business without that cost ultimately falling on consumers.
Bork, who teaches at Yale Law School, also advised that the bill is most likely unconstitutional.
Mobil, Shell Oil Co., Gulf Oil Corp. and Texaco Inc. think so, too.
"I can't believe that the Supreme Court is going to allow this," Jack Galloway, Gulf's regional director of public affairs, said.
"If the wave of the future is to tax revenues, not profits, then there eventually won't be any revenues -- there won't be any incentives," Galloway said.
For its advocates, the Connecticut tax is an attempt to aid oil-consuming states, facing a bleak future as their energy dollars flow to the oil-producing states, much as world dollars have poured into oil nation's treasuries since 1974.
"There has to be a way to recoup from the industry some of the money because of what increased oil prices have done to state budgets," Robert Brandon of the Citizen/Labor Energy Coalition said. "Otherwise, the consuming states are going to be left with nothing."
Grosso is confident that the tax is constitutional, but other supporters have doubts.
Legislator Irvin J. Stolberg, chairman of the Finance Committee, said passage of the tax "was based on hope and on the fact that there was no alternative."
Connecticut has no state income tax and in an election year it isn't going to get one, even though its other taxes are among the highest in the nation.
When the legislature took up the governor's budget, Stolberg said, "it was a question of including that gross revenue tax or having a stalemate. The votes just weren't there for any other alternative."
Stolberg said he surveyed some constituents and found that they overwhelmingly favored the gross revenue tax. But when asked if they would still favor the tax if it raised their energy costs, they overwhelmingly opposed it.
If that survey is accurate, the oil companies could turn public opinion by successfully passing along the cost. They have spoken of an increase of five or six cents a gallon in home heating oil because of the tax.