Republican lawmakers held petition drives at gas stations across the state Monday seeking to pressure legislative Democrats and the governor into canceling a gas tax hike scheduled for next week.
On July 1 Connecticut’s petroleum gross receipts tax on gas will increase to about 4 cents per gallon and diesel fuel will climb about 3.7 cents per gallon. In total, the two increases in taxes are expected to bring in about $60 million a year.
Connecticut’s petroleum gross receipts tax is based on a percentage of the current wholesale price of gas. Because the wholesale price fluctuates, the gas tax rate can be a moving target. But last year the legislature bowed to political pressure from Republicans and capped the wholesale price of gas at $3 per gallon. There was no desire to go further and scale back the increase from 7.5 to 8.81 percent. This means the maximum gross receipts tax is about 26.43 cents per gallon on $3. That’s on top of the 25 cent flat gasoline tax, which means Connecticut drivers could pay as much as 51 cents per gallon in state taxes on gasoline.
Currently, the wholesale price of gas is $2.82 which means drivers are paying about 45 cents per gallon in state taxes.
Democrats are quick to point out that a majority of Republican lawmakers voted for the gas hike in 2005 when it was passed under a Republican governor. That includes House Minority Leader Lawrence Cafero and Sen. Minority Leader John McKinney.
Gov. Dannel P. Malloy’s spokesman pointed to their 2005 votes Monday.
“Can someone please notify the credibility police?” he asked.
Earlier Monday, Malloy said every time the Republicans talk about cutting the gas tax they should “have big thing on their chest that says ‘I voted for the tax’.”
But both McKinney and Cafero said at a press conference that 2005 was “a different time.”
“Our employment rate isn’t close to what it is, our economy was far better. We did not have the distinction in 2005 of having the worst economic growth — in fact the only one with negative economic growth in the United State of America — a very different time indeed,” Cafero said at a press conference across the street from a Shell gas station.
In 2005, the General Assembly set forth a schedule of increases in the petroleum gross receipts tax from 5.8 percent in 2006 to 7.5 percent in 2009 and 2013 and then 8.81 percent in 2014. The budget passed earlier this month did not cancel the scheduled increase even though it will be more predictable since it can only be levied on $3.
When they approved the legislation in 2005 that money was supposed to go to transportation, but that’s not what’s happening, McKinney said explaining his opposition to the increase now. The fund created by collection of the gas tax is being raided to help balance the state budget and pay for general operating expenses.
About $91 million in special transportation funds were swept into the general fund in the 2014-15 budget passed earlier this month.
Both Republican legislative leaders are banking on the fact that public pressure from the petition will continue to build and force Democratic lawmakers back into a special legislative session to cancel the scheduled increases.
But House Speaker Brendan Sharkey said three weeks ago that canceling the increase would mean finding about $60 million in savings elsewhere in the budget. He said doing that would create a larger deficit.
“It’s not even the dog days of summer and the Republican leaders are howling about a tax they led the charge to raise,” Adam Joseph, a spokesman for Senate Democrats, said. “. . . This is just another case of Republican leadership playing politics — just like they did when they failed to produce an alternative budget during the legislative session.”
Cafero did offer some suggestions to make up the lost revenue, including taking money from the Rainy Day fund, instituting a hard hiring freeze, or finding other savings in the contract the governor inked with state employees back in 2011. He also suggested the state cut the two-year, $37.6 billion budget by $120 million.
Motor Transport Association of Connecticut President Michael J. Riley said the tax increase will negatively impact the trucking industry, which transports food and goods in and out of the state. He said every truck that passes through Connecticut will now be paying a state tax of 54.9 cents per gallon used in the state.
Riley said in the past the state’s diesel tax has been used to pay for upkeep of roads and bridges. He said this year, for the first time in a few years, the legislature swept money from the Special Transportation Fund into the General Fund.
“It’s just not necessary to bang the daylights out of a critically important industry like this in order to fund general revenue,” he said. “We need roads and bridges to be fixed, but we don’t need to be cranking up the fuel tax to be able to pay for General Fund expenses.”
Chris Herb, president of the Connecticut Energy Marketers Association, said this is the fifth increase in the petroleum gross receipts tax in a six-year period.
He said businesses such as landscapers who use diesel fuel for their equipment are already leaving the state to gas up their equipment. When that happens the crew of five guys also go into the store to buy sodas and food. He said that means gas stations near the border in Connecticut are closing because they can’t compete.
Massachusetts is about 20 cents cheaper per gallon than Connecticut and that’s mostly the difference in the tax, Herb said last week in a phone interview.
“We may have arrived at the tipping point,” he added.
But it’s the summer and “without fail” lawmakers will call Herb when they’re returning from the Cape to ask him why gas is so much more expensive in Connecticut. He said he explains to them it’s the taxes.
What Connecticut hasn’t calculated is how much business bleeds over the border. Would it make sense to lower the tax and retain those customers?
Herb said the real test will be in a year from now when there’s enough data to make those calculations.
Republican lawmakers were not calling on the state to decrease the tax, but they were asking for it to remain at 7.5 percent.