Connecticut’s trucking and petroleum industries are warning that a nearly 30 percent hike in diesel fuel taxes since last summer — including a nickel bump on July 1 — will hurt their businesses and stymie the state’s economy in general.
And the lobbyist for Connecticut’s largest truckers’ association said his group would urge state lawmakers to consider rolling back at least some of the latest increase when they meet in special session next month.
“That’s a painful, painful hit in taxes,” said Michael J. Riley, president of the Motor Transportation Association of Connecticut, which represents over 800 companies. “And it comes when movers are on their knees, construction companies aren’t building anything and freight hauling is just beginning to get back on its feet. This is not a business-friendly move.”
Riley was referring to this week’s announcement by the Department of Revenue Services that diesel taxes would rise per gallon from 46.2 cents to 51.2 cents effective July 1. Under a statute adopted five years ago, the diesel tax is adjusted annually using a complicated formula that analyzes wholesale diesel price changes over the prior year, as well as state taxes on regular gasoline.
Last July that formula added 3.6 cents per gallon to the diesel tax rate. And the legislature and Gov. Dannel P. Malloy added another 3 cents on top of that last summer to help close the state budget deficit.
All totaled, the rate will have jumped 11.6 cents between this summer and last, an increase of 29.3 percent.
And that will push Connecticut’s diesel market over the tipping point, said Eugene Guilford, president of the Independent Connecticut Petroleum Association, which represents more than 570 gasoline distributors and home heating oil dealers.
“There is such a thing as raising your tax rate so high that you end up collecting less revenue,” he said. “Right now we are just so far out of whack.”
Connecticut already has one of the highest diesel fuel rates in the nation, outpacing all other New England states, New York and New Jersey. While Connecticut is headed for a 51 cents-per-gallon diesel rate in five weeks, its chief competitors charge: 41 cents in New York; 31 cents in Rhode Island; and 23.5 cents in Massachusetts.
“The disparity between Connecticut and our neighboring states is gigantic,” Guilford said.
And after the July 1 hike takes place, it could be enough to ensure Connecticut also has the highest retail price for diesel fuel in the region, he added.
Connecticut entered the week with an average retail price of $4.29 per gallon, topped only by New York at $4.31, while Rhode Island and Massachusetts were well behind at $4.09 and $4.07 respectively, according to the AAA. If the nickel increase were applied to Connecticut this week, it would push the overall price here to $4.34.
The legislature and Malloy approved some modest relief for consumers of regular gasoline this spring, adopting a circuit-breaker measure that effectively freezes the wholesale tax on that fuel for the next year.
Riley asked state policy makers to consider similar relief for diesel consumers.
“We kept telling legislators, ‘Diesel is not on your radar screen, but it needs to be,’” Guilford added.
But faced earlier this month with deficit projections both for the current year and for 2012-13, lawmakers opted not to act on diesel rates.
Diesel fuel taxes raised $98.6 million last fiscal year, according to state tax records, and have pulled in another $84.2 million through April 2012, with two more months of collections still to come in the current fiscal year.
Riley said that he would renew his request for some relief for diesel consumers when lawmakers return to the Capitol next month. The General Assembly is scheduled to come into special session on June 12 to adopt policy bills needed to implement the next state budget.
Some level of relief, even trimming a few cents off the next hike, is necessary to avoid driving up the price of groceries, beer and liquor, clothing and other goods routinely transported by trucks. “The people who use trucking services are businesses,” Riley said. “This increase doesn’t help them either.”
The House chairwoman of the legislature’s tax-writing Finance, Revenue and Bonding Committee, Rep. Patricia Widlitz, said Friday that she was “very sympathetic to their concerns.”
“I would not have any objections to bringing that issue up in special session,” she said. “It’s a reasonable request.”
But Widlitz, a Guilford Democrat, also noted that some officials might be hesitant to reopen a political Pandora’s Box such as taxes in a special session typically limited to a day or two.
Malloy’s budget director, Benjamin Barnes, said that while he understands the concern over diesel taxes, diesel prices throughout the Northeast generally have declined 10-15 cents per gallon over the past two months.
“I understand and I wish we could lower all of the taxes,” he said. “But we can’t afford to do that right now. I don’t think we should reopen taxes in a special session.”
But Rep. Sean J. Williams of Watertown, ranking GOP representative on the Finance committee, said the Democrat-controlled legislature could provide relief for diesel consumers if it had done a better job controlling spending both in the current budget and the one approved for next year.
Still, if it isn’t addressed next month, Widlitz said she wouldn’t be surprised to see diesel taxes get a more in-depth review in the regular 2013 session, which starts next January.