Tuesday, June 03, 2008

Caligiuri on the Gas Tax

Connecticut Should Cut Gas Taxes

Connecticut now has the highest gas prices in the nation. While most of the factors that have contributed to this harsh reality are outside our control as a state, there is one important factor that Connecticut can control – the amount we tax gasoline. Reducing our gas taxes is one thing the state can do to provide almost immediate relief to consumers. We should cut those taxes because people desperately need some relief.

Connecticut levies two different taxes on gasoline. The first is a flat tax of 25 cents per gallon. The second tax is known as the Petroleum Gross Receipts Tax. The Gross Receipts Tax is set at a percentage of the wholesale price of petroleum. According to the Independent Connecticut Petroleum Association (ICPA), at the current rate of 7 percent, the Gross Receipts Tax costs consumers approximately 25.7 cents per gallon of gasoline. The Gross Receipts Tax had been set at 5 percent for many years, but a series of increases was instituted in 2005 in order to pay for transportation projects, and that tax is still increasing. It is scheduled to go up again on July 1 when it is scheduled to increase to 7.5%.

A recent story in the Journal Inquirer compared gas prices and gas taxes in Connecticut to our neighboring states of Massachusetts, New York and Rhode Island. That story showed that the difference in gas prices between Connecticut and those other states could be correlated, almost to the penny, to the difference in the amount of gas taxes. For example, Connecticut consumers pay 22 cents more per gallon of gas than consumers in Rhode Island, while the difference in gas taxes is 19.7 cents. Similarly, we pay 28 cents more for a gallon of gas than people in Massachusetts and 27.2 cents more in gas taxes. Finally, when compared to New York, we are paying 8 cents more per gallon of gas and 10.6 more per gallon in gas taxes. As you can see, the difference in gas prices appears to be directly related to the difference in gas taxes; the higher the gas taxes the higher the price of gas. That is why I am convinced that lowering our gas taxes will result in lower gas prices.

Since first coming to office in January 2007, I have proposed eliminating the increases to the Gross Receipts Tax and blocking the future scheduled increases. I was able to show, using figures provided by the state's nonpartisan Office of Fiscal Analysis, that we could do that and still fully fund our transportation projects. My efforts have been defeated to date, but I will continue to push for these reductions as the only thing we can meaningfully do as a state to help consumers at the pumps.

One obstacle to cutting the gas taxes is that the state is now using the surplus tax revenue it generates from the Gross Receipts Tax to help fund the state's general fund budget. With significant budget deficits looming on the horizon, state policymakers will be more reluctant than ever before to lower our gas taxes. My argument to them is that we must decide what our priorities will be. I would rather find the spending cuts we need in order to pay for a reduction in our gas taxes so that we can help people at the pumps, than throw up our hands in despair and say that we cannot cut those taxes because the state is now facing a deficit.

High gas prices are hurting Connecticut's families and businesses. The fact that our state government is contributing to the pain at the pumps is something that should bother all of us. I will continue to work to lower Connecticut's gas taxes


  1. I completely agree -- we should reduce taxes on gas and shift them to tobacco products

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