Soaring gasoline prices have Republicans and Democrats scrambling for options to provide relief to motorists.
Republican gubernatorial contender Bob Stefanowski on Wednesday called for suspension of both state taxes applied to gasoline, while House and Senate Republicans scheduled a 10 a.m. press conference Thursday to unveil a relief plan.
Meanwhile, leaders of the Democratic majorities in the House and Senate have met with Gov. Ned Lamont’s administration this week to consider options to ease household budgets getting clobbered at the pumps.
The average retail price of regular gasoline reported Wednesday by AAA hit $4.42 in Connecticut — the highest mark recorded in state history. That’s also 20% higher than it was on Feb. 23, the day before Russia invaded Ukraine, a move that sent oil markets reeling.
According to the Connecticut Energy Marketers Association, a coalition of major fuel distributors, the wholesale price at New Haven Harbor — the single-largest fuel importing site in the state — has grown by 22% just since March 1.
“This is the single-biggest issue right now at the forefront of Connecticut residents,” said House Minority Leader Vincent J. Candelora, R-North Branford. “It has become a major stressor on people’s household income.”
Rep. Sean Scanlon, D-Guilford, co-chairman of the legislature’s Finance, Revenue and Bonding Committee, said the litmus test for judging all proposals will be to ensure households get actual assistance that won’t make things worse in the long run.
“Can we deliver meaningful relief to people that: A) Isn’t a gimmick; B) Is financially viable? C) Isn’t going to step back on progress that we’ve made?” he said.
Stefanowski would suspend both state fuel taxes
Stefanowski offered his solution Wednesday: Suspend state fuel taxes until next Jan. 1.
Connecticut currently imposes a flat 25-cents-per-gallon retail tax on gasoline.
It also taxes wholesale transactions at 8.1% — although a state-approved surcharge effectively boosts the rate to 8.81%. And while gasoline stations get billed for this tax, they build the cost into the price charged to motorists.
Whenever the wholesale price exceeds $3 per gallon — it hit $3.40 to start the week at New Haven Harbor — a cap enacted in 2012 limits the tax to 26.4 cents, as if the wholesale price were only $3.
That means motorists currently pay about 51 cents per gallon in state taxes when they fill up.
“Connecticut residents are paying some of the highest gas taxes in the nation, and they need immediate relief from this national surge in gas prices that has no end in sight,” Stefanowski said.
But things might not be that simple.
Gov. John Rowland and the legislature lowered the retail gasoline tax between 1997 and 2000 from 39 cents to 25 cents, but the initiative was plagued with complaints that motorists saw little to no relief in prices.
Some gas distributors didn’t pass the savings along to consumers. And even those that did still couldn't guarantee savings at times when the wholesale costs continued to rise.
Stefanowski said the state’s anti-price-gouging laws should prevent this, and if they lack the teeth to do so, lawmakers should reform that system as well.
There’s also the problem of the state’s Special Transportation Fund, which covers, among other things, the debt on the borrowing that pays for much of highway, bridge and rail upgrades. Its funding comes largely from gasoline taxes.
The STF is in balance for now. But even with increasing gasoline tax revenues, there are questions whether the fund will be enough to cover a decade-long, or longer, rebuild of Connecticut’s aging infrastructure.
The two fuel taxes raise close to $680 million over 12 months. Suspending them for nine months, say from April through December, could eliminate close to $500 million in revenue.
Stefanowski noted the state has $3.1 billion in its emergency budget reserve and can afford the hit without harming the transportation program.
But others say that’s a high price to pay when there’s no guarantee motorists will reap the benefits.
Other tax relief proposals in the works
“We need to move immediately when it comes to gas prices,” Lamont tweeted Wednesday. “We need to do it right, without sacrificing our infrastructure.”
Scanlon said Democrats are exploring all options that ensure households get the full relief that is intended.
One option is to create a new credit or rebate within the state income tax to cover fuel costs.
The income tax already is on the Finance Committee’s agenda this session. Lamont has proposed increasing a credit that helps low- and middle-income households pay local property tax bills, while Scanlon wants to create a new $300-per-child credit for those same groups.
Republican legislative leaders didn’t comment Wednesday on the specifics of the motorist relief program they would propose Thursday.
But Rep. Tim Ackert, R-Coventry, a member of the Finance Committee, introduced a bill this winter that would try to stabilize state fuel taxes over the long haul.
The wholesale tax that currently adds 26.4 cents per gallon to the price of gasoline was worth 21 cents to start the year. A little more than two years ago, when wholesale prices were much lower, it added just 11 cents to the retail price.
“Let’s make it predictable,” said Ackert, who proposed combining the wholesale and 25-cents-per-gallon retail levies into one fixed tax.
Ackert noted, for example, that legislators could still provide relief now, setting the tax somewhere below the combined 51-cent burden motorists currently face. And then consumers would know what to expect going forward.
Chris Herb, president and CEO of the energy marketers association, also endorsed the idea of taking volatility out of the wholesale tax, adding that a percentage-based-levy rapidly inflates taxes at the worst economic times.
And while legislators did impose that cap on the wholesale tax, the trigger is so high that the ceiling rarely comes into play.
“The cap is only effective when we have these outrageous situations, when Wall Street can't handle the fear that’s coming their way because of a war in Europe,” he said.
“It is literally insane to have a moving target at the pump.”