While Gov. Dannel P. Malloy and the legislature grabbed plenty of headlines this spring by not hiking state taxes, a huge drop in a crucial state fuel tax this summer has garnered less attention.
Connecticut’s tax on diesel fuel, which is fixed annually each summer with a statutory formula based on wholesale gasoline prices, fell 17 percent from 50.3 cents per gallon to 41.7, the Department of Revenue Services reported.
The levy also is down 25 percent from the 54.5 cents per gallon rate imposed two years ago.
“Fuel is the second-biggest cost to a trucking company besides labor,” Joseph R. Sculley, president of the Motor Transport Association of Connecticut, said Friday. The association represents more than 800 trucking and trucking-related businesses.
And Sculley noted that lower transportation costs assists a wide range of retail goods that are transported to stores by truck.
Connecticut, which had the highest diesel tax rate in the nation just a few years ago, still ranks high. According to the Federation of Taxpayer Administrators, only Pennsylvania and Washington state have higher rates, at 64 and 44.5 cents per gallon, respectively.
The General Assembly fixed a complicated formula in law in 2008 that sets the diesel rate each July based on an analysis of wholesale price changes in both diesel fuel and gasoline during the prior 12 months.
The diesel tax had reached 54.9 cents per gallon in 2013 after three years of increases had added 12.3 cents to the rate.
During that period and many of the years that preceded it, though, Connecticut did not invest sufficient funds in highway, bridge and other transportation infrastructure improvements, Sculley said.
Malloy proposed in January 2015 a 30-year initiative to invest a total of $100 billion in transportation.
But neither he nor the legislature have endorsed tolls, gasoline tax hikes or other revenue sources recommended by a study panel to fund the bulk of those improvements.
An initial five-year investment “ramp-up” period, from 2016 through 2020, was ordered, and a portion of the state sales tax receipts was dedicated to transportation to cover the additional costs.
But the legislature and Malloy scaled back that investment last May to help close a deficit in the budget’s General Fund without increasing taxes. And the legislature’s nonpartisan Office of Fiscal Analysis projected at that time that the budget’s Special Transportation Fund was on pace to run $45.8 million, or 2.6 percent, in deficit by the 2018-19 fiscal year.