The General Assembly on Wednesday approved a three-month state gasoline tax holiday starting April 1.
The bill, which passed 143-0 mid-afternoon in the House and cleared the Senate 33-0 shortly after 8 p.m., also would provide free public bus service over the same period and a sales-tax-free week on clothing and footwear in mid-April.
The legislation now heads to Gov. Ned Lamont, who helped to negotiate the relief plan and is expected to sign it.
“This is a great first step that we can take to give [consumers] some affordability, to give them some relief,” Rep. Sean Scanlon, D-Guilford, co-chairman of the Finance, Revenue and Bonding Committee, said of the $100 million plan.
“Help is on the way. We are here to do what we can to provide relief to our working families,” said Senate Majority Leader Bob Duff, D-Norwalk.
The measure would suspend the 25-cents-per-gallon tax that Connecticut imposes on gasoline sales at the retail level. The suspension would begin April 1 and run through June 30.
During the same period of time, state bus service would be free. Scanlon noted that most of these fares range from $1 to $2 per rider per trip.
The final element of the plan would suspend — during the week of April 10 to 16 — the 6.35% sales tax on clothing and footwear items costing $100 or less. The state normally provides a sales-tax-free week in August each year to help households purchase back-to-school clothing for children. That still is planned for later this summer.
“This certainly is some short-term relief. Certainly when we all come together, we can do very good things,” House Minority Leader Vincent J. Candelora, R-North Branford, said of the bipartisan legislation.
Legislators and Lamont have been discussing some form of tax relief for several weeks as the Russian invasion of Ukraine has driven up oil prices worldwide.
The AAA Northeast reports an average retail price Wednesday of $4.325 for one gallon of regular unleaded gasoline in Connecticut. That’s down from a recent high of $4.49 on March 11. One month ago, the AAA reported an average price of $3.67 per gallon in Connecticut.
Rep. Holly Cheeseman of East Lyme, ranking House Republican on the finance committee, agreed that the measure provides some needed relief for consumers reeling from skyrocketing gasoline prices and hefty inflation.
But Cheeseman also said majority Democrats in the House and Senate were missing an opportunity to do more to help motorists right now.
Besides the 25-cents-per-gallon retail tax, the state also imposes an 8.1% levy on wholesale transactions. A state-approved surcharge effectively boosts that wholesale rate to 8.81%. The state also imposes a tax ceiling whenever wholesale prices exceed $3 per gallon — as they do now — which caps this tax at 26.4 cents per gallon.
Gasoline station owners have long built the entire cost of this wholesale tax into the price, meaning motorists currently pay 51.4 cents per gallon to the state.
House and Senate Republicans wanted to suspend the wholesale levy, which is slightly higher right now than the retail tax.
Cheeseman also noted the relief plan doesn’t affect the 40.1 cents per gallon applied to diesel fuel, or a highway use fee that will hit commercial trucks starting Jan. 1.
“The residents of our state deserve an open conservation about making this state more affordable,” she said.
Senate Minority Leader Kevin Kelly, R-Stratford, also expressed disappointment there more wasn’t done now, calling it “disheartening” that some farmers had to protest Wednesday at the Capitol to get some lawmakers to realize the impending highway use fee will hurt agriculture.
“We’re in the black, we’re flush,” he said, adding that the surplus projections make the highway fee unnecessary. “It’s not fair to those families that are struggling.”
The dairy farming community was exempted from the highway use fee when it was approved last June, but other types of agriculture farms were not.
Sen. Cathy Osten, D-Sprague, proposed an amendment to exempt all agricultural businesses from the fee but then pulled the measure after acknowledging it would not pass on Wednesday.
But Osten also vowed to continue pushing for more relief for farmers between now and the close of the regular legislative session on May 4.
“I will not let this issue die on the floor today,” she added.
But House Speaker Matt Ritter, D-Hartford, said during a press conference prior to the House debate that this relief plan won’t be the last tax cut adopted this spring.
Democrats and Republicans at the Capitol have offered a wide array of tax-cutting proposals, with the General Fund on pace for a record-setting surplus of more than $2.7 billion. And analysts are expected to upgrade that projection again in late April.
Lamont and lawmakers from both parties have proposed cutting income taxes by reducing credits. The governor also wants to lower the cap on municipal car taxes.
Senate Republicans want to temporarily reduce the sales tax and suspend a 1% prepared meals surcharge. There are other proposals to assist businesses.
“This is a down payment,” Ritter said. “There is more to come.”
Senate President Pro Tem Martin M. Looney, D-New Haven, urged his colleagues not to underestimate the relief that was approved on Wednesday.
Waiving a 25-cents-per-gallon tax would save motorists about $3 each time they fill their cars. That, coupled with three months of free bus service and a week of sales-tax-free clothes shopping, will add up quickly.
“It certainly is noticeable to someone who is struggling,” Looney said.
Scanlon added that while the state budget’s $1.7 billion Special Transportation Fund isn’t as flush with cash as the General Fund, it also is in good shape and can afford to forfeit fuel tax receipts for three months.
Nonpartisan analysts project the fuel tax holiday alone would cost the state $90 million, while the Lamont administration estimates the STF is on pace to close the fiscal year with a $380 million surplus.
The Special Transportation Fund pays for Department of Transportation operating costs as well as the debt service on the borrowing that covers a major portion of state highway, bridge and rail construction work.
The sales-tax-free week would cost the General Fund $3 million, while the $8 million in bus fares the state would waive would be replenished with unused federal pandemic relief aid.