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July 8, 2019

Gasoline taxes are on the rise — just not in CT

By Keith M. Phaneuf | CT Mirror

Connecticut motorists haven’t faced a gasoline tax increase in six years and only two in the past 12.

But as they travel on one of the busiest weekends of the year, they still could face rising prices at the pump — provided they cross the border.

Twelve states ordered gasoline tax hikes that took effect this week, according to the nonprofit Institute on Taxation and Economic Policy (ITEP).

While many policymakers say fuel levies are on the way out, the latest increases mean 31 out of 50 states have raised gasoline taxes at least once this decade, according to ITEP.

And at least two Connecticut economists say the trend is not surprising.

“The transition to electric vehicles and hybrids obviously is something that seems to be gathering force, but the real question is how quickly are we going to make that transition?” said University of Connecticut economist Fred V. Carstensen. “We still have a huge inventory of gasoline- and diesel-consuming cars and trucks that is not going to instantly disappear.”

And with the AAA estimating a record-high 41.4 million Americans traveled by highway this Independence Day, “gas taxes are an opportunity for states to raise revenue at a time when the economy is slowing,” said Donald Klepper-Smith, an economist with DataCore Partners.

Klepper-Smith, who was Connecticut’s chief economic adviser in the late 2000s under Gov. M. Jodi Rell, said that for many states, gasoline tax hikes also are a “reasonable alternative” to boosting income taxes.

According to ITEP, of the 12 states that raised gas taxes this week, Illinois ordered the largest, adding 19 cents per gallon, a jump of 52 percent. Ohio ranked second, adding 10.5 cents per gallon.

In the Northeast, Maryland, Rhode Island and Vermont imposed smaller hikes, ranging from 1.4 cents to 0.6 cents per gallon.

Connecticut imposes two taxes on gasoline — a flat, 25-cents-per-gallon retail tax which hasn’t changed since July of 2000, and a percentage-based tax on wholesale transactions. Gas station owners then routinely build this cost into the base price they charge — meaning motorists ultimately pay both taxes.

Connecticut’s gas tax burden consistently ranked first or second in the nation immediately after three successive wholesale fuel tax hikes between 2005 and 2007.

But with only one increase since then, Connecticut’s ranking has fallen to eighth, about six cents per gallon more than the national average, according to the American Petroleum Institute.

The last increase came in July 2013 when the wholesale rate rose from 7 to 8.1 percent. Another surcharge effectively raises that tax to 8.81 percent.

The two state taxes currently total about 44 cents per gallon. Combined with the 18.4-cents federal fuel tax imposed in all states, the total gasoline tax burden Connecticut motorists face is just over 60 cents per gallon.

But while most other states continue to raise fuel taxes, Connecticut has swung in a different direction in recent years and is now exploring tolls as the next potential, major revenue source to rebuild its aging overcrowded highways, bridges and rail lines.

Neither advocates of tolling nor those who believe Connecticut could rebuild using existing resources have suggested raising gasoline taxes to complement their respective pitches.

Gov. Ned Lamont has dangled the prospect of reducing gasoline taxes if legislators will adopt tolls, suggesting fuel levies are going the way of the dinosaur.

“The gasoline tax simply does not provide the reliable revenue we need, period,” Lamont said when he made his first pitch for tolls back in February. “Gasoline tax revenues have been flat for 10 years and are expected to begin declining as cars become more efficient, and as the sales of electric vehicles increase.”

But Joe Sculley, president of the Motor Transport Association of Connecticut — the state’s largest trucking association — said Connecticut’s poor track record with fuel tax receipts explains why it isn’t following the example of other states when it comes to raising gas taxes or installing tolls.

Between 2006 and 2014, about $1.3 billion in receipts from Connecticut’s wholesale fuel tax was spent on non-transportation programs.

Voters approved an amendment to the state Constitution in 2018 creating a legal “lockbox” designed to ensure fuel tax receipts are not diverted for transportation, but Sculley said skeptics of this supposed safeguard are plentiful.

“In many other states, motor fuel taxes are specifically earmarked for roads and bridges,” Sculley said, adding that many people believe “we have no such guarantee in Connecticut.”

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