A scheduled increase in Connecticut’s tax on diesel fuel did not go into effect this month as a result of a provision within the state budget, which halted this year’s annual adjustment of the tax.
The state’s diesel tax is set through the combination of two elements: a flat, 29-cent rate and a variable rate calculated based on the previous year’s wholesale cost of diesel. Last year’s annual adjustment caused the diesel tax to increase from 40.1 cents per gallon to 49.2 cents.
That is where it will stay for this year, at least, due to the two-year state budget, which was passed on bipartisan votes of the state legislature in June and went into effect last week. The budget included a little-discussed provision that froze the variable rate at last year’s level.
In a press release, legislative Democrats estimated that the waived adjustment would save Connecticut consumers more than $37 million.
“I’m pleased that the budget cancels a planned increase in the diesel fuel tax that had been scheduled to go into effect,” Senate President Martin Looney said. “We are constantly trying to improve Connecticut’s business climate, and make us more competitive, whenever possible.”
Rep. Maria Horn, a Salisbury Democrat who co-chairs the Finance, Revenue and Bonding Committee, agreed that reducing the tax would ultimately help consumers.
“Transportation costs are a component of all consumer consumption in Connecticut, and I’m glad we took the opportunity to help control those costs for everyone in the state,” Horn said in a statement.
In an interview Thursday, John Blair, president of the Motor Transport Association of Connecticut, said he expected that the provision would help the state’s trucking industry, which relies on diesel fuel.
“As long as the wholesale prices don’t go crazy, then it could be beneficial to us,” Blair said. “I’ve been consistent that we truly appreciate the gesture, but we’d like to see it in perpetuity… A flat tax would allow for us a lot of predictability. Fluctuations make it very difficult for us to predict. For a year, we may feel comfortable but it would be much better for consumers [if the tax were fixed.] When diesel goes up, that money is passed down to consumers.”
In an interview Thursday, Rep. Holly Cheeseman, an East Lyme Republican and ranking member on the legislature’s tax-writing committee, also advocated taking another look at how the diesel tax is calculated.
“Particularly with these taxes that fluctuate so dramatically, given the wholesale price of the fuel, do you just set a fixed rate?” she said. “If you’re trying to predict future revenue streams, if you have a wildly fluctuating tax, you can’t have certainty. So maybe you look at setting a given level for X amount of time.”
Cheeseman hoped the legislature would build on this year’s action by conducting a holistic study of how Connecticut’s transportation infrastructure is funded, given an increase in the number of residents working remotely and the state’s commitment to reduce its reliance on fossil fuels.
She said the provision freezing the diesel tax represented a “belated” acknowledgment by Democrats that consumers would ultimately bear the burden of more expensive trucking costs.
“I think finally there’s a realization on the other side that anything that increases the cost of trucking and bringing goods into the state of Connecticut is going to at the end have an effect on our residents in terms of the cost of goods,” she said.