They may not agree on why gas prices have risen to where they are today, but the Senate and the House unanimously passed a bill Wednesday that attempts to cap the gasoline gross receipts tax as a percentage of no more than $3 per gallon.
The gross receipts tax has been described as a “hidden tax” because it is levied at 7.53 percent of the wholesale price of gasoline. Hooking the tax to the moving target of the wholesale price per gallon means the amount of the levy has ballooned or shrunk with the market.
Wednesday’s action would not limit that percentage — in fact that rate is expected to increase from 7.53 percent to 8.81 percent on July 1, 2013 — but the General Assembly voted to set a cap on how high the tax can go by pegging it to a percentage of no more than $3 per gallon wholesale.
Republican lawmakers in both houses tried to cap the percentage portion of the tax too, but the amendments failed along party lines.
Initially, Democratic lawmakers — who hold majorities in both chambers of the General Assembly — took some time to warm up to the idea of capping it. At a March 19 press conference, Democrats said the cap would expire after one year. But with gas prices weighing on the minds of their constituents and with an election in the fall, Democratic lawmakers reversed course and fast-tracked the bill Wednesday.
“The more we thought about it, we’re providing relief to consumers,” Senate President Donald Williams, D-Brooklyn, said Wednesday before the debate on the bill.
At $3 per gallon, Williams said, the state will be able to collect enough revenue to balance the budget. House Speaker Chris Donovan agreed.
“With the numbers I’ve seen we can absorb this right now,” Donovan said. “We’re raising the money we need to raise and we’ll make adjustments to get to where we need to be, but right now we’re concerned about the high price of gasoline and we’re doing something about it here.”
The fiscal note estimates the state will lose $4.9 million to $5.4 million over the next two years by capping the tax at 7.53 percent on up to 8.81 percent of $3. Under this rule, and if the percentages do not change, 7.53 percent amounts to a maximum gross receipts tax of 22.59 cents per gallon. The maximum GRT on 8.81 percent would be 26.43 cents per gallon.
Williams said he was not in favor of capping the percentage at 7.53 percent. Republican lawmakers pointed out that the gas tax will go up again on July 1, 2013, to 8.81 percent respectively.
“I think we have all of next year and next session to take a look that,” Williams said.
Sen. Len Suzio, R-Meriden, who championed the issue of capping the gas tax, said the disparity between Connecticut’s gas prices and the prices in neighboring states “is our tax policy.”
“A lot of people said this won’t provide a lot of relief immediately, maybe a penny and a half, I wish it could be greater right now,” Suzio said.
He said every time the taxes go up a penny, the state collects an additional $15 million. He said the state already will collect $60 million more from the GRT than was anticipated.
“I think it is a dangerous thing going forward to predicate our budget on high gas prices,” Suzio said.
Sen. Andrew Roraback, R-Goshen, warned residents to hold on to their hats because come July 1, 2013, they will be paying more in gas taxes even with the cap in place.
He said it is hard for him to understand the rationale of capping the tax this year, yet “we are prepared to expose Connecticut consumers to an 8.81 percent tax in 18 months.”
Sen. Minority Leader John McKinney opined that the state had reached a tipping point and public outrage over gas prices had finally inspired lawmakers on both sides of the aisle to reach consensus on at least a cap, if not a cut.
Democratic Senators maintained that it is the second half of the bill, the part that protects consumers against price gouging, that is more significant than the cap.
Sen. Ed Meyer, D-Guilford, said the state has experienced a 16 percent increase in gas prices over the last 90 days and the bill they voted upon Wednesday says that any increase of 15 percent or more over 90 days will trigger an investigation for price gouging.
“That kind of increase comes with remarkable market factors that suggest that the price of gasoline actually should be lower and not higher,” Meyer said.
Democratic lawmakers maintain that the price of gasoline is increasing because of increased market speculation. Republican lawmakers say they do not believe market speculation impacts the price of gasoline as much as the state’s taxes.
Currently, Connecticut’s total gas tax is more than 49 cents per gallon. If the federal gas tax is added, the tax is closer to 67 cents per gallon.
The bill now goes to Gov. Dannel P. Malloy’s desk. If Malloy signs it, the new law could be in place as early as April 15.