Lunsford Admits His Automatic Gas Tax Increase Makes "Huge Difference" for Consumers

After bragging about giving Kentucky an automatic gas tax increase to “grow” Kentucky’s state budget, Bruce Lunsford has finally admitted that the difference in price caused by his tax scheme is a burden that makes a “huge difference” to consumers.
During a recent campaign stop, Lunsford talked about a gas station he visited where the owner had priced his gasoline six-cents lower than the local competition to “take care of the regular customers.”

Lunsford said: “That six cents made a huge difference for them.”

According to the Courier-Journal: “Lunsford, as Brown's chief legislative liaison, did push for a change in the gas tax formula. At the time the tax was 9 cents a gallon; since then the price of gas has more than tripled, with the tax rising to 21.1 cents per gallon.”  That’s an increase of 12.1 cents per gallon, twice the Lunsford threshold of what constitutes a “huge difference.”

“If six-cents makes a ‘huge difference,’ then Lunsford is finally admitting his automatic gas tax increases are hurting Kentucky families,” said McConnell campaign manager Justin Brasell.  “I was surprised when he bragged about raising taxes in the first place.  This is not someone Kentuckians want representing them in the U.S. Senate,” Brasell said.

Even Courier-Journal columnist David Hawpe was forced to admit over the weekend that because of Bruce Lunsford’s work, Kentucky’s gas tax has gone up 134-percent! 

“Lunsford’s record on gas taxes is clear and consistent.  He still supports higher gas taxes, he admits that when they go up families feel the pain, and he does not care what these taxes do to the cost of gas at the pump,” Brasell said.

“At a time of record high gas prices, Kentuckians are undoubtedly going to reject Bruce Lunsford’s tax-raising ambitions and return Mitch McConnell to the U.S. Senate in November,” Brasell said.

The Truth About Bruce Lunsford’s Latest Ad

Quote Source: May 2008, Lunsford campaign video

Bruce Lunsford is airing a television ad in which he endorses measures that would further increase the cost of gasoline. Saying that Senator McConnell voted “to give them [oil companies] billions in tax breaks,” Lunsford cites four votes:

• Roll Call # 339, 11/17/2005 – This amendment to the Tax Relief Act of 2005 would have created a $3 billion windfall profits tax. Senator McConnell opposes windfall profits taxes, because the costs would be passed on to consumers who already pay too much at the pump.
  
  
• Roll Call # 222, 6/21/2007 – Senator McConnell voted in favor of an amendment stating that tax increases on oil companies would not go into effect unless the Department of Energy certified that 1) the tax increases would not result in an increase in retail prices for gasoline and 2) that the increased taxes would not result in making the U.S. more dependent on foreign oil.
  
  
• Roll Call #223, 6/21/2007 – This was a vote on cloture on the tax title of the Democrats’ energy bill. Senator McConnell opposed cloture, because the measure would have increased taxes by $28 billion and led to higher gasoline prices. One of the tax increases in this measure would have applied a 13% excise tax on oil produced in the Gulf of Mexico – making the U.S. even more dependent on Middle Eastern oil.
  
  
• Roll Call #146, 6/10/2006 – Senator McConnell voted against cloture on the motion to proceed to Senator Harry Reid’s energy bill, which included billions in increased taxes in the form of a windfall profits tax that would’ve resulted in increased prices for consumers.

Interestingly, nowhere in the ad does Bruce Lunsford dispute the fact that he supports and is responsible for automatic gas tax increases in Kentucky. Instead, he relies only on the slanted editorial opinions of two liberal, pro-tax, anti-McConnell newspapers.

The Facts

The average price of gasoline in Kentucky is more than $4 per gallon, and the state gas tax just went up again on July 1st of this year.  The tax has gone up each year since 2004, costing Kentuckians hundreds of millions of dollars.  Why did this tax go up at a time of record high gas prices?  It all goes back to 1980, when Bruce Lunsford, then a partisan employee in the Kentucky Governor’s office, lobbied to change the tax so that it would increase automatically as the cost of gas increases.

Don’t let Bruce Lunsford tell you he’s not a Frankfort politician.  Lunsford’s political career spans nearly thirty years, and in 1980 he was serving as the chief lobbyist for Governor John Y. Brown.  He worked with the Legislature to fight for the plan to automatically increase Kentucky’s gas tax. 

Why is this an issue now?  Not only is the cost of gas the top issue on voters’ minds, but Bruce Lunsford has made it a top issue in his campaign, citing his work to change the gas tax in Kentucky as one of his signature achievements in his public career, both speaking about it publicly and touting it on his campaign website as reasons Kentuckians should vote for him.

Change We Can’t Afford

Kentuckians are still paying today for the “change” that Lunsford brought us in 1980.  At a time of record gas prices, Lunsford believes it is right to take more money out of the pockets of hard working Kentuckians and give those funds to the Frankfort bureaucracy.

Lunsford’s “change” resulted in a sneaky provision that has automatically increased gas prices every year since 2004, costing Kentuckians hundreds of millions of dollars.  Thanks to Bruce Lunsford, these tax hikes go into effect without a vote from the General Assembly, even if Kentucky has a budget surplus.

The Lunsford-Obama agenda is all about change.  But can we afford any more of Bruce Lunsford’s “change?”  If Bruce Lunsford goes to the U.S. Senate, what sort of consequences will Kentucky taxpayers feel 28 years from today?  He already opposes extending tax cuts passed in 2001 and 2003, which cut taxes for everyone who pays them.  Most political candidates won’t tell you they intend to raise your taxes, but Bruce Lunsford openly embraces the idea and brags about raising Kentucky’s gas tax. 

Bruce Lunsford: Tax and Spender

Bruce Lunsford says his automatic tax hike is “progressive.”  Lunsford even tells us that he pushed for the gas tax hike so that the state government would have “a budget that could grow.”

Lunsford’s campaign said recently that he is “happy to take a principled stand … much like how he’d rather give tax cuts to middle class families who need them instead of people who don’t.”  Well, Bruce’s party’s budget calls for tax increases on those who make as little as just over $30,000 per year.  If you make more than that, you must be rich, according to their logic.  Maybe that’s why Lunsford has no qualms about taking more from you every time you fill your gas tank. 

Full-Service Pandering

Bruce Lunsford doesn’t want you to know he contributed to the high gas prices you are paying at the pump, and he thinks he can fool you by staging carefully scripted photo ops.

Lunsford likes to play a little game of make-believe, where his staff drives him to a gas station, and he pumps gas for a few minutes while telling us how much he “feels our pain.” At one recent photo op, he told the media he was going to pump gas for four hours, but he took off as soon as the cameras went away. And sometimes he accidently shows us how out of touch he really is.

One of Lunsford’s gas station photo ops was held in Richmond, Kentucky. After he left, Lunsford wrote a blog post about his experience. In the post, Lunsford wrote that Richmond was home to the “Eastern Kentucky Campus of U.K.” As any man who twice ran for Governor should know, Richmond is home to Eastern Kentucky University. EKU is a University of 16,000 students, and has never been a part of U.K.

Kentuckians aren’t fooled by Bruce’s photo ops. We know he doesn’t “feel our pain,” and now we know that his actions make the pain even worse.

Senator Mitch McConnell: Fighting Against Tax Increases

In 1990 and 1993, Senator Mitch McConnell voted against two massive increases in the federal gas tax.  In 1990, Senator McConnell opposed a gas tax increase signed by a Republican president, and in 1993 he opposed an increase signed by a Democrat President.  While Bruce Lunsford brags about his efforts to “change” the gas tax in Kentucky, Senator Mitch McConnell is fighting against tax increases.  It doesn’t matter to Senator McConnell who is in the White House – he has consistently opposed raising taxes, including the federal gas tax.  He will continue to fight for lower taxes for hardworking Kentucky families.  Unlike Bruce Lunsford, Mitch McConnell believes you deserve to keep more of your hard earned money.

The Lunsford No Energy Plan

Perhaps Bruce Lunsford’s position on energy was best summed up by a Democrat staffer on Capitol Hill:

“Right now, our strategy on gas prices is ‘Drive small cars and wait for the wind.’”

Of course, Bruce isn’t in the habit of using energy efficient vehicles.

In fact, Lunsford’s energy plan is actually a No Energy plan, because it’s so tired and weak – exactly what you’d expect from a 30-year Frankfort political insider taking his talking points from Washington liberals who’re fighting to do anything except drill for more U.S. oil to lower gas prices.

The Lunsford No Energy Plan:

• Oppose expanded domestic energy exploration and production.
• Lunsford bets on his racehorse named “Drilling for Oil,” but don’t bet on Lunsford to take any action to lower prices at the pump.
• Support Jimmy Carter’s failed tax on American energy companies.
• The non-partisan Congressional Research Service did a study on Carter’s windfall profits tax.  The result?  DECREASED energy production inside the United States, and increased dependence on foreign oil.
• Follow the orders of the Sierra Club.
• “There's no such thing as clean coal," said Bruce Nilles, who directs the Sierra Club's National Coal Campaign."
• Follow the orders of Democratic Senator Harry Reid.
• “Coal makes us sick.”
• Say one thing on energy speculation, do another.
• Attack contributions from the gas and oil industry, while taking contributions from the oil and gas industry.

The Lunsford-Obama Windfall Profits Tax Is a Tax on Consumers

Bruce Lunsford and Barack Obama say that recreating Jimmy Carter’s failed policy of increasing taxes on U.S. oil companies would solve our energy crisis.  Senator McConnell, most economists, and people with common sense disagree.

In fact, the non-partisan Congressional Research Service studied the issue and that a Windfall Profits Tax would result in more imports of foreign oil. 

Senator McConnell supports reducing our dependence on Middle Eastern oil, not increasing it.

In part, the CRS report concluded, “The WPT [Windfall Profit Tax] had the effect of reducing the domestic supply of crude oil below what the supply would have been without the tax. This increased the demand for imported oil and made the United States more dependent upon foreign oil as compared with dependence without a WPT.”

The Wall Street Journal summed up the issue in a May 3, 2008, editorial: 

“You may also be wondering how a higher tax on energy will lower gas prices.  Normally, when you tax something, you get less of it, but Mr. Obama seems to think he can repeal the laws of economics. We tried this windfall profits scheme in 1980. It backfired. The Congressional Research Service found in a 1990 analysis that the tax reduced domestic oil production by 3% to 6% and increased oil imports from OPEC by 8% to 16%. Mr. Obama nonetheless pledges to lessen our dependence on foreign oil,  which he says "costs America $800 million a day."  Someone should tell him that oil imports would soar if his tax plan becomes law. The biggest beneficiaries would be OPEC oil ministers.

There's another policy contradiction here. Exxon is now under attack for buying back $2 billion of its own stock rather than adding to the more than $21 billion it is likely to invest in energy research and exploration this year. But hold on. If oil companies believe their earnings from exploring for new oil will be expropriated by government – and an excise tax on profits is pure expropriation – they will surely invest less, not more. A profits tax is a sure formula to keep the future price of gas higher.”

Investor’s Business Daily said such proposals “demonstrate a woeful ignorance of basic economics.”

Jared Bernstein, an economist at the Economic Policy Institute, a liberal think tank, called the windfall tax nothing more than a "feel good idea." (“Why do economists frown on a tax on windfall oil profits?” by David Lightman; McClatchy Newspapers May 19, 2008)
In June of this year, The Los Angeles Times noted in an editorial, “Trying to find an economist who thinks a windfall-profits tax is a good idea is like searching for a climatologist who thinks global warming is caused by trees.” (The Los Angeles Times, June 11, 2008)

Back in 2005, The Washington Post concluded, “the profits are a spur to new investment; taxing them reduces the return that companies will expect to make on new oil finds or refineries, with the result that there will be less oil and gas available in the future and hence higher prices.  Moreover, taxes on windfall profits tend to exacerbate dependence on imports, because companies generally make windfall profits only from their U.S. drilling operations; contracts for drilling foreign oil are usually structured so that the windfall from high prices is captured by the foreign government. As a result, windfall taxes penalize oil drilled in the United States.”

Senator Jeff Bingaman (D-NM): “Specifically, Bingaman said the windfall profits tax is bad policy because it creates ‘inconsistencies’ in the commodities markets. ‘It's very difficult to determine what's a windfall profit and what's not,’ Bingaman said. ‘It's very arbitrary.’” (“Dems Unveil Oil Bill,” Albuquerque Journal, 05/08/08)

Additional background on the Windfall Profits Tax (WPT) 

• The proposal supported by some Senate Democrats and introduced by Senator Harry Reid would levy a 25 percent tax on the profits of companies in the U.S. oil and gas industry, in order to prevent those companies from accruing so-called “windfall” profits when oil prices are high.

Are American oil and gas companies paying their fair share?

• The corporate tax rate in the United States is 35 percent.  In 2006, the 27-largest domestic oil and gas companies paid a record $90.4 billion in taxes, at an effective tax rate of 40 percent.       
• As of January 2008, the average tax on each gallon of gasoline was 47.0 cents.  The oil and gas industry has testified that it earns about 4.0 cents per dollar of gasoline sales.    

How effective was Jimmy Carter’s tax?

• Congress passed a Windfall Profits Tax in 1980.  According to the Congressional Research Service, this tax was imposed on companies on the difference between the market price of oil and an adjusted based price.  The tax was repealed by President Reagan in 1988.    
• According to a report by the non-partisan Congressional Research Service:
  • Domestic oil production was reduced by 1.2 percent to 8.0 percent, or between 320 million to 1.27 billion barrels.   
  • America’s oil imports were increased by between 3.0 percent and 13.0 percent.  As a share of total supply, oil imports rose from 32 percent to 38 percent during this period. 
  • The tax was projected to generate more than $393 billion in gross revenues between 1980 and 1988.  It actually generated just $80 billion, or 20 percent, of that expected total. 
  • Total net revenues from the Windfall Profits Tax amounted to just $38 billion between 1980 and 1988, or 22 percent of the projected net total of $175 billion.      
  • According to CRS, by 1988 those in “Congress became convinced that the [Windfall Profits Tax] was a complex and costly tax to comply with and to administer.  It was a compliance burden to the oil-producing industry and an administrative burden for the Internal Revenue Service even though, after FY1986, the tax generated little or no tax revenues.”

What would happen if the Lunsford-Obama tax increase were to pass?

• In 2007, 1.9 billion barrels of oil were produced in the United States.  If a Windfall Profits Tax was put in place today, a decrease similar to that of the 1980s – 1.2 percent to 8.0 percent – would result in per-year production losses of 22.3 million to 149.0 million barrels of oil. 
• High energy prices encourage companies to produce greater amounts of oil and refine greater amounts of gasoline.  An additional ‘windfall’ tax on industry earnings would depress capital expenditures as new projects become less profitable.  It would discourage industry from exploring more, producing more, and refining more.  
• Higher taxes will not lead to lower energy prices, but smaller supplies of energy will lead to higher prices for energy.  Prices at the pump will decrease when America develops more of its own oil reserves; commercializes its vast reserves of coal and oil shale deposits; and expands its capacity.              

What others are saying about the Lunsford-Obama tax increase plan:

“It’s a terrible idea today.”
      --Phil Verleger, Director of Domestic Energy Policy under President Carter (responsible for implementing the first windfall profits tax), April 2008

“As our country’s history with the great Windfall-Profit Tax of 1980 amply demonstrates, there are lots of reasons to oppose it… the levy early on proved itself an administrative nightmare since it effectively required the collection of ‘detailed information on each individual oil-producing property in the United States.’… The tax so depressed business activity that it had an effect on the general economy.” 
      --Amity Shlaes, Council on Foreign Relations, May 2008

“If oil companies believe their earnings from exploring for new oil will be expropriated b government – and an excise tax on profits is pure expropriation – they will surely invest less, not more.  A profits tax is a sure formula to keep the future price of gas higher.”
-- Wall Street Journal (Editorial), May 2008

“A [new] windfall profits tax, however emotionally satisfying it may seem, also harms most people saving for their retirement or living on retirement savings. More than 40% of that cost would fall on tens of millions of savers and retirees who own oil stocks directly or indirectly through their pension  plans or retirement accounts.”
-- Robert Shapiro, former Under Secretary Of Commerce under President Clinton, November 2005

There are some supporters of the windfall profits tax…
“As soon as it will be approved and published on the Official Gazette, we will be ready to collect the Windfall Oil Tax Prices to all oil operators.” 
-- Rafael Ramirez, Venezuelan Minister of People’s Power for Energy and Oil, April 2008

The Audacity of Hypocrisy
Lunsford profits from energy hedge funds and oil & gas investments.

Bruce Lunsford’s empty rhetoric doesn’t match his personal financial investment decisions.  He has made stops at several Kentucky gas stations, wildly attacking Senator Mitch McConnell, oil companies, and Wall Street for high as prices.  In fact, Lunsford’s campaign website specifically attacks “Wall Street” for driving up gas prices.

But a search of Lunsford’s financial disclosure filed with the U.S. Senate on April 17, 2008, shows that he has profited massively from hedge funds that invest in oil and gas companies.  At least until April, Bruce Lunsford was potentially making millions from oil and gas industry investments.  Ironically, during the primary campaign, Lunsford criticized his opponent Greg Fischer for having invested in Lunsford’s healthcare companies, which Fischer had criticized.  Now Lunsford is blaming the very hedge funds in which he invests and profits from for the energy crisis.

A Kentucky political blog picked up the story, outlining Lunsford’s investments:

• Lunsford is invested in Goldman Sachs Capital Partners V, LP, an $8.5 billion private equity fund for "high net worth individuals." Lunsford valued his assets in that non-publicly traded fund as between $1,000,001 and $5,000,000.  Lunsford's financial disclosure forms list GS Capital Partner V's investment as including: CVR Energy, Inc.; Knight, Inc.; McJunkin Red Man Corporation; SunGuard Data Systems, Inc.; and Cobalt International Energy.

• CVR Energy…operates a 113,500 barrels-per-day-throughput-capacity oil refinery in Coffeyville, Kansas, and a crude oil gathering system in Kansas and Oklahoma…
• McJunkin Red Man Corporation: Exclusively geared toward the distribution of industrial and oilfield PVF products…has a significant presence in the oil and gas industry…
• Knight, Inc. owns the general partner of Kinder Morgan Energy Partners (NYSE: KMP), one of the largest publicly traded pipeline limited partnerships in America with an enterprise value of approximately $20 billion. KMP is the largest independent transporter of refined petroleum products in the United States…
• SunGard Data Systems, Inc., which acquired FAME Energy. SunGard FAME provides ‘data services to support energy traders, research analysts and risk managers of energy companies and financial institutions.’ Sounds like it helps the very energy speculators…Lunsford blames…
• Cobalt International Energy, LP…an oil and gas exploration and development company focused on pursuing…opportunities in the Deepwater Gulf of Mexico and offshore international areas.  Cobalt…wants to drill some of that oil that the Cubans and Chinese are extracting just miles from our shore. Lunsford recently said he opposes oil drilling off American shores…yet would profit from a company that exists to do just that…

Debunking the Myths

Echoing the talking points of liberals in Washington, Bruce Lunsford falsely claims that oil companies are sitting on millions of acres of oil leases that they refuse to drill. Investor’s Business Daily says Lunsford’s claim is “completely dishonest.”

Lunsford wants you to believe that large profits for oil companies are causing higher gas prices.  Industry observers report that the average profit for gas is 8 or 9 cents on the dollar.  At the same time, the government takes about 12 cents of each dollar in taxes.

Lunsford’s liberal Washington backers say it would take ten years for oil from expanded drilling to hit the market.  But in 1995, President Clinton vetoed legislation authorizing environmentally responsible energy exploration in ANWR.  If Democrats hadn’t prevented ANWR energy exploration in 1995, more gasoline would be on the market today.  Senator Mitch McConnell supported expanded energy exploration in ANWR in 1995, and he strongly supports it today.

Here are some reasons that the so-called “Use it or Lose it” plan promoted by Lunsford is nothing but smoke and mirrors:

“Use it or Lose it” is already the law.

• Federal energy lease holders already must produce oil or natural gas within 5-10 years to live up to the terms of the lease and the law.
  
• A lease can be terminated by the Secretary of the Interior if the Secretary determines the lessee fails to comply with any provisions, including not drilling.

The most promising areas for drilling are where drilling is prohibited.

• In the 1980s, 160 million acres of onshore land was leased for exploration. Today only 50 million acres are leased.
  
• Only 6% of federal onshore land is available for leasing.
  
• ANWR contains 10.4 billion barrels of oil, but is 100% closed (U.S. Geological Survey).
  
• OCS contains 86 billion barrels of oil, but is 97% closed (U.S. Minerals Management Service).
  
• On-Shore Federal land contains 31 billion barrels of oil, but is 94% closed (BLM).
  
• Oil Shale on Federal land contains 2 trillion barrels of oil, but is 100% closed (DoE).

A lease does not mean there is oil to drill.

• A lease is a permission to explore to find out whether or not there is recoverable oil.
  
• A lease does not guarantee the discovery of oil and gas—a lessee may never actually find oil or gas. Between 2002 and 2007, 52% of all exploration wells were dry.

Senator Mitch McConnell: Working for Real Solutions

Senator McConnell has introduced the Gas Price Reduction Act, because $4 per gallon gasoline is more than a temporary inconvenience. High gas prices are hurting American families and threatening our economy.

Senator McConnell is leading the fight to “find more and use less” by working to get a Senate vote on the Gas Price Reduction Act, which would:

1. Increase offshore oil exploration
   
2. Harness the untapped potential of oil shale
   
3. Encourage development of electric cars and trucks, and
   
4. Give the Commodities Futures Trading Commission the personnel it needs to properly regulate energy markets and speculators

So far, the Senate Majority has refused to consider this legislation that has 44 co-sponsors. Senator McConnell has collected more than 10,000 signatures on his petition urging Congress to take action on this bill.

Speaking on the Senate floor on this issue, Senator McConnell addressed competing proposals on this issue, and summed up the situation like this:

“Part of the reason for this timid approach by our friends on the other side, as anyone can see, is the upcoming election.  They’ve made no secret of the fact that they don’t want to consider real legislation until Inauguration Day, when they hope their candidate will take the White House.

“We need to realize that Americans are more concerned at the moment about paying for groceries and filling up their tanks with gas than they are about the political calendar.  Americans aren’t thinking about next January.  They’re thinking about today.  And they expect their elected representatives in Washington to take serious steps now to lower the price of gas.”

Some Democrats are beginning to acknowledge that not only must we reduce demand for energy, we must increase supply. Senator McConnell concluded his remarks by saying:

“Some of our friends are beginning to acknowledge the undeniable.  As of today, 10 Democrats have expressed some level of willingness to explore offshore.  They’re acknowledging a groundswell of public opinion -- even among self-described liberals -- in favor of more domestic supply.  And Republicans have a proposal that was designed specifically to attract their support and the support of any other member of the Senate who actually wants to achieve a result here.

“It promotes energy efficient vehicles like plug-in electric cars and trucks. And it addresses supply and demand by lifting the ban on Western oil shale development and opening up exploration far from the shores of the states that want it.

“Ours is a serious proposal that directly addresses the price of gas at the pump. It is not a gimmick.  It’s not a half-day band aid on a year-round problem.  It is a solution.  And it’s what the American people demand.

“High gas prices are a serious problem that demands to be taken seriously.

“It’s time our friends on the other side put partisan differences -- and timid, peripheral half-measures -- aside and get serious about this urgent situation.  The American people expect and deserve it.”

More news worth reading:

• Democratic Senator Harry Reid’s hometown newspaper, The Las Vegas Review-Journal, supports more domestic energy production: “Congress should indeed authorize offshore drilling, authorize drilling the ANWR, authorize exploration of the Green River Valley, and facilitate the expansion of our oil refining capacity. If Democrats block such common sense, things are going to get a lot worse at the gas pump, in the electric bill, and in our economy in general. Time to start taking names.”
  
• Watch Senator McConnell discuss the Gas Price Reduction Act on Fox and Friends.
  
• Democratic aide says, “Right now our strategy is to drive small cars and wait for the wind.”
• Watch Senator McConnell discuss his legislation on Fox News.
  
• UPI and The Washington Post cover Senator McConnell’s efforts to pass the Gas Price Reduction Act.
  
• Reuters on the McConnell bill.
  
• The Politico: McConnell Seeks Democrat Cooperation on Drilling

Help Senator McConnell Lower Gas Prices