Gov. Ned Lamont and legislative leaders agreed in principle Monday on a sales-tax holiday, free CT Transit bus service for a month and a suspension of the state’s 25-cent-a-gallon retail tax on gasoline until June 30.
If passed by the legislature, the state would forgo about $100 million in revenue, providing some relief to taxpayers and election-year talking points to politicians as inflation hits the highest point since the midterm elections of 1982.
“Is it enough? No,” Lamont said, asking and answering his own question. “Inflation is a lot more than the tax cut we’re providing.”
But he said the relief provides “a bridge” to the start of the new fiscal year on July 1, when other tax cuts are expected, including a break on motor vehicle taxes that could save some motorists hundreds of dollars.
The biggest cost in the new bipartisan package would be $90 million in lost revenue from a gasoline-tax holiday lasting at least three months, if in place by April 1. A wholesale tax on fuels would not be affected.
“We’d like to get that holiday kicking in as soon as we can, hopefully within a week,” Lamont told reporters after consulting with legislative leaders via Zoom video conferencing. “I want to make that available all the way through June 30.”
The state, which currently has a one-week holiday from the 6.35% sales tax on clothing purchases in August, would add a second holiday week in April.
The proposal by the Democratic governor was welcomed by Democratic and Republican leaders in the General Assembly, though Senate Democrats hedged on a timetable for passage.
“I do wish it goes further. But needless to say, it’s a step in the right direction,” said Senate Minority Leader Kevin Kelly, R-Stratford.
House Minority Leader Vincent J. Candelora, R-North Branford, said he was glad to see the governor endorsing a tax holiday rather than a more complicated rebate plan.
“I’m pleased that the Democrats have answered that call that we made last week,” Candelora said.
Republicans last week called for a suspension of the wholesale tax on fuels, which would not be affected by the holiday outlined Monday.
Connecticut has two taxes on motor fuels: a per-gallon retail tax sensitive to usage, and a wholesale gross receipts tax sensitive to price. Rising gas prices have helped stabilize the special transportation fund, which had been approaching insolvency.
“We have a little bit of breathing room,” Lamont said.
The fund relies on fuel taxes to pay debt service on transportation projects, as well as the budgets of the departments of Transportation and Motor Vehicles.
State and federal excise taxes charged at the pump total 43.3 cents, with 25 cents going to the state and 18.3 cents to the federal government. At current prices, the per-gallon impact of the wholesale tax is 26.4 cents.
The House and Senate are in session Wednesday, with an agenda focused on passage of a bill expanding the use of absentee ballots.
The tax-holiday legislation, which will be outlined in caucus to rank-and-file lawmakers, could be ready next week, legislative leaders said.
House Speaker Matt Ritter, D-Hartford, said action this week would be “a tad optimistic.” Senate Democrats issued a statement predicting a vote in the next two weeks.
AAA Northeast’s price tracker set the average price of gasoline in Connecticut on Monday $4.465, while the national average was $4.325.