GOP Offers Several Ways to Cut State Gas Taxes [Commentary]

June 5, 2008

Connecticut motorists are now paying the highest gasoline prices in all of America and it is past time we do something about it. State Republican leaders are again urging the Senate President and House Speaker to expand the call of the June 11th special session to include a debate on state gas taxes, which are also among the highest in the nation.

In fact, the difference in gas prices between Connecticut and our neighboring states correlates, almost to the penny, to the difference in the amount of gas taxes. For example, Connecticut consumers pay 22 cents more per gallon of gas than consumers in Rhode Island, while the difference in gas taxes is 19.7 cents. Similarly, we pay 28 cents more for a gallon of gas than people in Massachusetts and 27.2 cents more in gas taxes. Finally, when compared to New York, we are paying 8 cents more per gallon of gas and 10.6 cents more per gallon in gas taxes.

While countless factors contributing to the high price of fuel are outside of the legislature’s control, the state gas tax is one factor over which we have total control. I believe we must move quickly to reduce it.

Connecticut levies two different taxes on gasoline. The first is a flat tax of 25 cents per gallon. The second tax is known as the Petroleum Gross Receipts Tax. The Gross Receipts Tax is a percentage of the wholesale price of petroleum. According to the Independent Connecticut Petroleum Association (ICPA), at the current rate of 7 percent, the tax costs consumers approximately 25.7 cents per gallon of gasoline. It had been set at 5 percent for many years, but a series of increases was instituted in 2005 in order to pay for major transportation projects. However, the tax is still increasing, and the excess revenues are quietly being transferred to the state’s General Fund to pay for new and ongoing projects. The tax will climb to 7.5 percent on July 1st if the legislature does not do something to stop it.

To that end, I have joined other Republican leaders in introducing a series of proposed budget adjustments that, among other things, will provide immediate gas tax relief. Our proposal would stop the Gross Receipts Tax hike scheduled for July 1st and cap the tax by freezing the wholesale price the rate is assessed against. Because the gross receipts tax is levied per dollar instead of per gallon, as oil prices go up, consumers pay more in taxes. Our proposal would protect citizens from increases that are built into this tax as a result of increasing oil prices. If the tax is 25.7 cents per gallon today, it will remain 25.7 cents even if oil prices rise.

We would provide additional relief by implementing a two-month gas tax holiday, reducing the cost of gas an additional 10-cents per gallon through Labor Day. We would more than offset the proposed gas tax cuts by offering 11,000 qualified state workers a voluntary Early Retirement Incentive Program that aims to save the state more than $140 million and shrink the size of an already bloated state government.

In the end, we must do something. As the cost of gasoline heads toward $5 per gallon, driving up the cost of food and other necessities, this is not the time to sit idly by as a state legislature. People need relief now and there are ways for us to help provide it.