The hidden gas ‘tax’

OPINION:

In Washington, many ideas are being touted to alleviate consumers’ pain at the gas pump; suggestions range from temporarily cutting the federal gas tax to ending additions to the strategic petroleum reserve. The highly touted, proposed three-month temporary reduction in the 18.4 cent federal gasoline tax would amount to an annualized tax savings for Americans of 4.6 cents per gallon. As politicians argue the alternatives, there is one obvious way being overlooked: Reduce the outrageous credit card fees that are a growing part of each fill-up. These are nothing more than another gas “tax.”

A way to provide permanent relief from this tax is offered by the Credit Card Fair Fee Act, a bill sitting in Congress that could cut 5 cents from the price of every gallon. The act targets the fees merchants pay on every credit card transaction. Called “interchange” in the credit industry, these fees are skyrocketing.

For convenience stores, which sell over 80 percent of gasoline in the United States, such fees are now twice their profits: 146,000 store owners pay $7.6 billion annually in interchange fees, compared to the $3.4 billion they earn from their businesses. Gasoline costs are particularly impacted because roughly two-thirds of all gas purchases are credit or debit transactions. But neither Visa or MasterCard will negotiate interchange fees. Because merchants fold their operating costs into retail prices, bankcard charges increase customer costs.

The Credit Card Fair Fee Act is all about requiring the credit card company monopoly, Visa and MasterCard, to simply negotiate with merchants the fees they charge. This will help level the “paying field” between Americans and gasoline consumers in other nations. While U.S. purchasers pay 1.75 percent fees, consumers in other industrialized countries often pay much less.

Australians, for example, pay just 0.45 percent. With U.S. gas prices averaging $3.70 per gallon, this means Americans pay 4.7 cents per gallon more than drivers Down Under because the Australian legislature requires Visa and MasterCard to compete at lower rates. The record shows that banks have negotiated lower rates abroad only after courts or legislators ordered them to negotiate.

This is not a fight pitting big business against big business, but a struggle in which small corner stores are trying to control the fees they are charged by the world’s largest financial institutions. My family has been a part of the convenience store industry for three generations. Our industry consists primarily of mom-and-pop proprietors 62 percent of stores are owned by a single-store operator. While most sell a major brand of fuel, they are not owned or operated by major oil companies. In fact, only about 3 percent of stores selling fuel are owned by oil companies and that proportion continues to decline.

Meanwhile, Visa and MasterCard are recognized by U.S. courts as a bank-owned and operated monopoly because they control 73 percent of transactions and 85 percent of the cards issued in this country. As the Federal Reserve observed last week, the methods deployed by credit card companies are “unfair and deceptive.” Interesting that Visa and MasterCard have set aside $3.65 billion for legal fees to defend their business practices while the CEO of American Express is the fourth-highest paid CEO in the country at $50.1 million.

It is no secret the credit card industry drops significant cash on Capitol Hill to maintain the monopoly status quo. The American Bankers Association which represents Visa, MasterCard and their member banks put $1.7 million into congressional pockets in 2007. To date, only 30 representatives have had the guts to say “no” to bankers and support the bipartisan Credit Card Fair Fee Act.

I sat in Sen. Arlen Specter’s office recently as merchants and bankers explained credit card monopoly pricing to him. Those of us who are merchants pleaded for his support of the act. During the meeting, one banker commented that “now is not the time to reduce these rates.” Was he insinuating that because banks helped create the credit crunch that is devastating the country, they cannot afford reduced credit card fee income? Three months have passed and we are still waiting for Mr. Specter’s decision on this important legislation.

I ask every voting American to contact their representative and senators and ask for their support of the Credit Card Fair Fee Act. When it passes, we might all permanently save 5 cents a gallon on gas while maintaining a federal gas tax that will rebuild our country’s infrastructure and keep our strategic oil reserves intact.

American Express notes in its financial statements: “In certain countries where antitrust actions or regulations have led our competitors to lower their fees, we have made adjustments to our pricing to merchants to reflect local competitive trends.” It is time for the United States to be another such country. Congress, where are you?

Scott Hartman is president and CEO of CHR Corp., which operates Rutter’s Farm Stores.