As gas prices creep up to an average $3.40 per gallon, state legislators are debating on whether to go ahead with another increase this July.

Earlier this week the General Law Committee approved a bill that would cancel the July 1 increase in the gross receipts tax, which is built into retail gas prices as a percentage per gallon.

“This is an insidious hidden tax that was put into place when the price of gasoline was at $1.50 a gallon,” Sen. David Cappiello, R-Danbury, said in a press release earlier this week.

“We talk about price gouging at the pump all the time, but the biggest culprit is the state of Connecticut,” Cappiello said.

What many people may not know is that “Every time the price of gasoline increases the state collects more money and to increase the rate at a time when gas prices are approaching $3.50 a gallon is really beyond belief.  We simply cannot allow these increases to happen,” Cappiello said.

The gross receipts tax is currently 7 percent, or about 19.2 cents per gallon. Add that to the 25-cent excise tax charged at the pump and Connecticut residents pay a whopping 44.2 cents to the state for every gallon they pump. The gross receipts tax is expected to go up to 7.5 percent on July 1.

Cappiello said that since 2005 the state has taken in an additional $141 million from the gross receipts tax.  In 2008, the state expects to take in a record $320 million from the tax.

“The state is already getting more money than it ever projected, so to allow these rate increases to continue is nothing short of price gauging by the state and the taxpayers are the ones who are getting fleeced.  It’s wrong, and we need to put an end to it.”

Click here to see a chart of gas prices and taxes throughout the Northeast.