The Gas Tax

April 5, 2012

Families throughout our state are trying to make ends meet and rising gas prices are not helping. Whether we commute to work or pick up groceries, we must purchase gas to get where we need to go. You may not be aware, but every time that you fill up your car, you are paying three different taxes for the gasoline that you purchase. Now that gas prices in Connecticut are over $4 per gallon, it is important that we work to lessen its impact. Thanks to the efforts of Republicans in the General Assembly the gas tax was recently capped.

Coming together in a rare show of bipartisanship, Republicans and Democrats voted 36 to 0 in the Senate in favor of Senate Bill 457, “An Act Concerning A Cap On The Petroleum Products Gross Earnings Tax And Penalties For Abnormal Price Increases In Certain Petroleum Products,” last Wednesday. Senate Republicans have been pushing for this legislation for years, but majority Senate Democrats have never given us the opportunity to vote on it – until now. When traveling in any of our border states, whether it is New York, Massachusetts or Rhode Island, there is a striking difference in the price of gas. This alone should be evidence enough to lower these taxes, but it was only until recently that the issue gained considerable attention again.

Since his election last year, State Senator Len Suzio (R-Meriden) reinvigorated the movement by raising public awareness of the hidden nature of the gross receipts tax and gathered thousands of signatures for a petition. As of last week, there were nearly 4,000 signatures. Initially, gas taxes were put in place to fund transportation projects, such as maintaining roads and bridges. However, over the years, the revenue from gas taxes was used less and less for transportation needs and more for funding increased government spending elsewhere in the budget. While the bill that ultimately came up for a vote did not go far enough, it is nevertheless a step in the right direction. But let’s be clear, much remains to be done, and you can be sure that I will continue to advocate for lower gas taxes.

Each time you fill up your gas tank, you pay three taxes. The first is a federal flat tax of 18.4 cents. The second is a state flat tax of 25 cents. The third is a hidden tax called the gross receipts tax. This was the focus of our legislation. Currently, this tax is determined by the daily wholesale price of gasoline. This price is taxed at a rate of 7.53%, meaning that at current gas prices, we pay 24 cents. For one gallon of gasoline, these three taxes come to a total of 67 cents.

How will the gas tax cap affect you? It is true that for now, the cap will result in lowering the tax by about one cent per gallon. While this small amount is laughable, the savings will be higher if the price of gas continues to rise. In addition, the gross receipts tax is scheduled to increase from 7.53% to 8.81% on July 1, 2013. Republicans introduced an amendment that would have eliminated the planned increase, but it was defeated in a vote along party lines.

What more can be done? We must look at lowering the gas taxes to put our state in line with neighboring states. Critics claim that this would result in neglecting our transportation system. However, these claims are unfounded as much of the gas tax revenue is already being used for spending in other areas. Ultimately, the General Assembly must work toward cutting a few cents off of the flat tax of 25 cents which would result in families keeping more of their hard-earned income. While capping the gas tax was a start, it is certainly by no means the end. If gas prices continue to rise, Connecticut families will continue to struggle and the legislature must seek ways to ease that burden rather than contributing to it through increased taxation.