The state Senate is going through contortions to avoid raising the retail tax on gasoline. Earlier in the session, the senators proposed slapping a five percent tax on the wholesale price of gasoline while allowing a rebate for anyone who saved their gas receipts and filed twice a year. They dropped that plan after it was roundly ridiculed, but now they’re back: proposing a six percent tax on terminal operators, dubbing it the “Baghdad tax.” According to today’s Times-Dispatch:

“This will sock it to the Saudis,” said J. Scott Leake, a consultant to Senate Republican leaders. Senators figured that the Virginia terminal operators, including such giants as British Petroleum and Shell, are making record profits and would absorb the added tax costs rather than pass them on to consumers.

I’ll leave it to Scott, who is normally a commonsensical guy, to explain exactly how the tax will “sock it to the Saudis” when BP and Shell are owned by Europeans, and the vast majority of oil imported into the U.S. comes from Mexico and Venezuela.

Here’s what really tickles me: Senators “figure” that Virginia terminal operators will absorb the added tax costs. Hmmm. Figuring is what you do on the back of an envelope. What kind of analysis is this “figuring” based on? Have any terminal operators testified before the Senate regarding the economics and profitability of local oil/petroleum terminals? If so, there is no mention of it in the article.

Here’s what I “figure”: If all the terminal operators were being taxed, no one would risk losing sales by passing on the tax to consumers, so that’s what they would do. If for some undecipherable reason they actually did absorb the costs, thus reducing the profitability of their Virginia operations, I “figure” they would be less likely to invest in their expansion of their terminal capacity in order to meet future increases in gasoline consumption. Of course, the resulting restrictions on gasoline supplies would mean higher prices for consumers.

As I’ve argued repeatedly, the logical way to raise money for transportation is to raise the gasoline tax. That’s based on the premise that those who benefit from such taxes should be, to the greatest extent possible, the ones who pay the taxes. I don’t think we need to raise any taxes for transportation right now, so I’m not advocating a change to the gas tax. But if you had to raise taxes, that would be the logical way to do it.

The Senate risks appearing dazed and confused by refusing to acknowledge the obvious. Combine this gambit with the back-pedaling on the regional transportation authorities, and the opening round of the special session clearly goes to the House.