With tolls off the table in 2021, state officials could look to gasoline tax hikes to salvage Connecticut’s imperiled transportation program.
And while neither Gov. Ned Lamont nor legislators have proposed an increase, one of the arguments most frequently used to defeat it — Connecticut’s gas taxes are among the nation’s highest — no longer holds true.
An analysis of states’ fuel tax burdens by the American Petroleum Institute showed Connecticut’s levies — which contribute about 36 cents per gallon to the price — rank slightly below the national average and 15th nationwide.
The API, a national trade association for the oil and natural gas industry, did rank Connecticut’s 69-cents-per-gallon diesel tax ninth overall among states, and seven pennies greater than the national average.
“I do anticipate a conversation around fuel taxes” during the next General Assembly session, said Rep. Roland Lemar, D-New Haven, co-chairman of the Transportation Committee. The session convenes Jan. 6.
Lemar, who said Connecticut should join the growing list of states also exploring road usage charges, added that the transportation funding debate can’t be postponed without severe economic risk.
“We have a multi-billion-dollar asset base … that requires substantial, continued investment,” Lemar said, referring to Connecticut’s aging, overcrowded system of highways, bridges and rail lines. “In order to meet the needs of a 21st-century transportation network, we need new revenues.”
State analysts recently projected the budget’s $1.7 billion Special Transportation Fund [STF] will run in deficit this fiscal year and in the next three, going insolvent in 2024.
And transportation officials say Connecticut currently spends barely enough now to maintain a state of good repair, with very little for improvements to speed up travel and reduce congestion.
Lamont has said he won’t pitch tolls for a third successive year but hasn’t weighed in on the issue of fuel taxes. Max Reiss, his communications director, said the transportation funding issue hasn’t gone away and it’s important some lawmakers are recognizing that.
“Members of the General Assembly must come prepared in the next session to bring resolution to this longstanding issue and help move Connecticut’s economy forward through infrastructure improvements,” Reiss said.
Lamont had hoped to bolster the transportation fund with toll revenues, but lawmakers balked at a plan to charge all vehicles in 2019 and a proposal last January to toll just trucks.
The governor was trying to avoid asking for more at the pumps from consumers, who already provide almost $700 million, or about 40% of the revenue needed to support the STF, through two taxes.
Many are familiar with the 25-cents-per-gallon, retail gasoline tax, which hasn’t changed since mid-2000.
Less known is the Petroleum Products Gross Receipts Tax, which charges 8.1% on wholesale transactions involving gasoline and other fuels. Another surcharge effectively raises that tax to 8.81%. But gas station owners have long conceded that they build this expense into the retail price, meaning consumers pay that as well.
Based on wholesale prices in Connecticut this week, the gross receipts tax adds about 11 cents per gallon to the price of gasoline. The wholesale price — and the resulting tax — were nearly the same back in July when the API analysis was compiled, according to the Connecticut Energy Marketers Association.
Combine the retail and wholesale taxes, and Connecticut motorists pay 36 cents per gallon, well below the national average of almost 43.5 cents.
Not that long ago, though, it was a different story.
After three successive summer hikes of the wholesale tax combined with several prolonged spikes in gasoline prices, Connecticut motorists in 2008 were pumping 52 cents per gallon into the state’s coffers — the second-highest rate among all states.
But with retail prices approaching $4.40 per gallon here in the spring of 2008, then-Gov. M. Jodi Rell and the legislature canceled a fourth wholesale fuel tax hike originally scheduled for July 2008.
And that levy has only increased once since then, in the summer of 2013.
Since then, though, more than half of all states have increased gasoline taxes while Connecticut has stood pat.
Sen. John Fonfara, D-Hartford, co-chairman of the Finance, Revenue and Bonding Committee, also expects a 2021 debate on increasing fuel taxes.
Fonfara did not propose any hikes Tuesday. But if one is considered, he said, it should involve the gross receipts tax — and reform a longstanding problem with that levy at the same time.
Such a move could substitute a percentage-based tax, linked to the price of gasoline, with a flat rate, such as the 25-cent retail gas tax.
Businesses and consumers have long complained that because the tax is based on a percentage of the wholesale price, it fluctuates sharply due to spikes and troughs in the oil market.
Chris Herb, president of the Connecticut Energy Marketers Association, agreed. If higher fuel taxes are needed to maintain the transportation program, a more stable wholesale levy is the place to start.
“Consumers, small businesses and the state — having a predictable revenue stream is in their best interest from a budgeting standpoint,” he said.
But Rep. Sean Scanlon, D-Guilford, the finance committee’s other co-chair, was wary of raising gasoline taxes, though he also predicted legislators will want to consider them next year.
Scanlon, who supported tolls on cars and trucks — provided the system was limited and not spread across all highways — said many motorists from out-of-state can avoid Connecticut’s gas tax hikes simply by filling up before crossing the border.
“We have to figure out a way so that just Connecticut residents are not bearing the burden,” he said.
Others agreed fuel tax hikes will be difficult — for reasons of trust.
Patrick Sasser, leader of No Tolls CT, said many from his group would fight gas tax hikes with equal intensity, given the state’s track record.
Between 2006 and 2014, Connecticut spent more than $1 billion in fuel tax receipts on non-transportation programs.
“The state hasn’t proven to us they’ve been fiscally responsible,” Sasser said.
Lamont also contributed to the distrust surrounding transportation shortly after he took office in January 2019, said House Minority Leader Vincent J. Candelora, R-North Branford.
The governor and his fellow Democrats in the legislature’s majority shaved $170 million off pledged sales tax revenue transfers to transportation over two years in their first biennial budget together.
And that came a few months after voters, by an eight-to-one margin, ratified the so-called “lockbox” amendment to the state Constitution that prohibits officials — once a new funding source for transportation has been established — from spending the funds on something else.
The administration argued its 2019 maneuver didn’t violate this amendment since the sales tax transfers — though already enacted in law — hadn’t actually occurred yet from an accounting standpoint.
But Candelora said voters saw it as contrary to the spirit of the amendment.
“The gimmicks that were played with the lockbox last year brought our fears to reality,” he said.
But Lemar countered that Republicans have offered no plan to salvage Connecticut’s transportation program, and the clock keeps ticking.
“We’re looking at significant [budget] shortfalls in the coming years just to maintain the status quo,” Lemar added, “and we know the status quo is not enough.”