State Representative Len Greene today voted for a permanent cap onConnecticut’s Gross Receipts Tax, a 7.53 percent tax rate on the wholesale price of gasoline. The cap, which is now marked at $3-per-gallon, will provide relief for consumers as the price of gasoline is expected to rise in the upcoming summer months.
Senate Bill 457, An Act Concerning A Cap On The Petroleum Products Gross Earnings Tax And Penalties For Abnormal Price Increases in Certain Petroleum Products, passed unanimously on Wednesday marking a victory for Republicans such as Greene, who has advocated for this legislation for several years.
Recently, Democrats embraced the concept they once opposed and proposed just a year-long cap to the “gross receipts” tax. Days later, after pressure from lawmakers such as Greene, Democrats agreed upon the permanent cap called for by Republicans.
“For far too long, the soaring cost of fuel has had detrimental affects on every family and every business in Connecticut,” said Greene. “People who fill their tanks within our borders are paying around 50 cents for every gallon of gas just in state taxes alone. Capping this tax was the right thing to do for our state’s economy and for our residents.”
The per-gallon tax total paid at the pump represents three separate taxes. First, there’s the federal tax— 18.4 cents. Next, there’s a fixed 25-cent state tax. Then, there’s a state “gross receipts” tax levied as a percentage of the wholesale price. The rate is 7.53 percent, costing consumers roughly 25 cents per gallon—a figure that increases every time the price of gas rises, giving the state more and more revenue.
Rep. Greene and Republicans attempted to lock that percentage, which is scheduled to increase to 8.1 percent next summer. Majority lawmakers, however, voted down the proposal 94-53.
The percentage increase in 2013 would bring the state roughly $55 million in new tax revenue.
While Greene was pleased an agreement on the cap was finally reached, he stressed the importance of capping the percentage rate of the tax as well.
“Permanently capping the gross receipts tax was a great start to saving our tax-payers some money at the pump, but we still need to address the way our state fundamentally taxes gasoline,” said Greene. “The percentage rate on this tax is planned to increase by 15 percent next year when gas prices are bound to be even higher. Without holding the percentage rate at 7.53 percent our citizens will be facing yet another tax increase that will be difficult to afford.”
In the past, the gross receipts tax was used to fund transportation-related projects and upgrades, but over the years the fund has been raided to support general government spending increases.
The bill also limits price gouging during “abnormal market disruptions” such as when stress to an energy resource from weather conditions, acts of nature, failure or shortage of an energy source, strike, civil disorder, war, national or local emergency, oil spill, or other extraordinary adverse circumstances occur, and changes current petroleum profiteering statute to allow investigations of price gouging if wholesale gas prices rise by 15 percent in any 90 day period.