When Gov. Dannel Malloy set out to defuse this year’s budget crisis, he made a no-new-taxes-in-2013 pledge. Well, if you filled your tank this week and noticed the four-cent-per-gallon increase, you’d have to ask yourself whether he fulfilled that promise.
The gross receipts tax (GRT) on petroleum products is one of the least known taxes in the state. Those who are familiar with it, however, despise it for a host of reasons. Perhaps the foremost justification for such loathing is the GRT’s utter lack of transparency.
Also known as the “hidden tax,” the GRT, which was officially at 7 percent until July 1, is applied at the wholesale level to gasoline and a variety of petroleum products, excluding heating oil. Wholesalers then pass that cost on to the retailers, who in turn pass it on to you and me. The state’s “visible” gas tax is a flat 25 cents per gallon. But the unseen GRT balloons right along with the wholesale price. Fortunately, lawmakers capped the GRT last year, exempting from the wholesale tax anything above the first $3 per gallon.
To make matters worse, the GRT has seldom been used for what it was supposed to fix. Eight years ago, then-Gov. M. Jodi Rell reached an agreement with House Speaker James Amann to set aside $1.3 billion to upgrade the state’s transportation infrastructure.
The project was to be paid for with annual increases in the GRT. The revenues were supposed go into a special transportation fund first established 30 years ago by former Gov. Bill O’Neill. Presumably, restricting the gas tax was supposed to make those taxes more palatable to the general public. After all, almost everyone drives and we all want safe roads and bridges, right?
But since then, the fund has been regularly raided to pay for non-transportation projects. Just this year, for example, the budget Malloy signed will, over the next two years, pull $91 million out of the fund and put it straight into the Capitol, where desperate lawmakers will use the dough to plug budget holes. This is yet another gimmick Malloy has used to balance the budget — one for which he has repeatedly criticized his predecessors.
Perhaps more troubling is the twice-hidden cost of the GRT. Because of a state Supreme Court decision against Texaco in 1987, the statute creating the GRT “is to be interpreted to include within the plaintiff’s tax basis the tax payments that it has collected from its customers.” In layman’s terms, that means the taxes collected from the GRT are themselves subjected to the GRT. That’s right: the tax is being taxed, which means the new effective rate is actually 8.81 percent, not the official rate of 8.1 percent.
And evidently, state officials would like to keep the entire subject of gas taxes hidden from view. As the CT Mirror’s Keith Phaneuf pointed out earlier this week on WNPR’s Where We Live, when a series of gas-tax hikes began in the mid 2000s, many gas stations posted notices at the pump letting consumers know how much of their money was going to state taxes. Those station owners were told to take the placards down, ostensibly because they were violating laws about what can be posted at the pump. Cynics, of course, suspected another motive on the part of state officials.
Republicans in the General Assembly started a petition drive to prod Malloy into calling for a special session to halt the latest increase in the GRT, but few of them have any credibility. The increases were passed in 2005 with the support of the both Rep. Lawrence Cafero and Sen. John McKinney, now the minority leaders of their respective houses. The bill was signed by former Republican Gov. M. Jodi Rell.
Malloy is fond of saying that since Connecticut hasn’t collected tolls on its roads since the 1980s, gas taxes are the primary source of transportation infrastructure funding. Right now, it looks like gas taxes are the primary way we balance the budget, even as we raid the transportation fund — a phenomenon that is especially appalling in light of the fact that we share two important but related distinctions. A recent report by the American Society of Civil Engineers found that Connecticut’s roads are tied with Illinois for worst in the nation. And we have the third highest gas taxes in the country after New York and California.
Is something wrong with this picture?
Terry Cowgill blogs at ctdevilsadvocate.com and was an editor and senior writer for The Lakeville Journal Company. He can be found on Twitter @terrycowgill.
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