LANSING – The governor should have the authority to roll back the sales tax on gasoline if the state is reaping windfall revenues due to high prices, Gov. Jennifer Granholm said Tuesday. But while she tied such rollbacks to overall state sales tax revenues, Dick DeVos, her Republican challenger, said he favors an immediate move to drop the sales tax on gasoline.

The comments came as Granholm signed legislation (HB 4502, PA 125) boosting punishment for gasoline stations that engage in price gouging.

The governor backed a House-passed bill (HB 4204*) giving the governor the power to exempt gasoline from the sales tax. The Senate has not taken up the bill.

“Everyone wants to see gasoline prices go down. The question is what is the most effective way to do that,” the governor said.

Granholm said sales taxes are not the reason for high gas prices, adding that simply eliminating the sales tax when gas prices spike up would endanger funding for schools and public safety.

But Granholm said this is not the time to roll back the sales tax because revenues overall have not increased. “There’s only so much money a consumer has to spend and if they’re spending it on gasoline they don’t have it to spend on other things,” she said.

She said the step should be taken when the state sees a sales tax “windfall,” but did not define what that would be.

DeVos agreed with the governor having the power and said the sales tax should be suspended “immediately” on gasoline because the state is getting more money than it expected. “It’s time to get it done,” he said.

He said he does not think the consequences for schools “would be substantial. We’re talking about a tax that has gone up over expectations.”

The governor said she favors an excess profits tax at the federal level, adding, “I’m interested in a rate of return on investment that allows for some profit, but not the eye-popping obscene profits we’ve seen.” She said a reasonable reference point is 11 percent that exists for some other regulated energy industries.

She urged greater investments in alternative fuels to “break our addiction to the Middle East.”

DeVos also opposed a cap on oil company profits, saying that would affect pension investments by retirees. Better solutions to the gas price issue, he said, are building more refineries and stepping up research on alternative fuels, where he said Michigan should be the national center of such enterprises.

“Capping profits on oil companies is bad economic strategy,” DeVos said.

THE ANTI-GOUGING LAW:

Although the new law signed by Granholm gives the state more tools to go after gas stations that overcharge or otherwise cheat customers, the governor said the real power to control gasoline prices is at the federal level. The governor also said the Department of Agriculture has nearly doubled the number of inspectors investigating complaints about fuel quality and quantity.

She said 250,000 persons have signed an online petition calling on President George W. Bush to cap oil profits and that other Democratic governors are establishing similar petitions.

“Paying $3.00 per gallon while oil companies enjoy $10 billion in tax breaks and rake in billions more in profits is just plain wrong,” she said.

The new law is supported by Michigan Petroleum Association and Michigan Association of Convenience Stores and the Associated Food and Petroleum Dealers.

Ed Weglarz, vice president for Petroleum/AFPD, said most stations subsidize gasoline sales by revenues from stores, car washes or other aspects of the business but added those owners who are unscrupulous should be punished. “Gas retailers of Michigan are suffering along with the citizens with record high prices,” he said.

The Department of Agriculture would be authorized to impose fines of $5,000 for a first violation by gas stations, $10,000 for a second and $25,000 for a third.

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