State legislators and Gov. Ned Lamont spared Connecticut’s trucking industry – and, by extension, many consumers – from a hefty increase this month in the state’s diesel fuel tax.
But the 12-cents-per-gallon bump that never happened, and the 9-cent increase that was imposed in July 2022, have advocates for trucking companies, gas stations and others calling for permanent relief, either through fuel taxes or by eliminating a new highway mileage fee on large commercial trucks.
Given that the state budget’s Special Transportation Fund just closed the 2022-23 fiscal year with a 13% surplus – even after a gasoline tax holiday that returned hundreds of millions of dollars to motorists – advocates say government can afford to provide even more relief.
“Diesel and gasoline prices affect the cost of every single item we buy,” said Michael Fox, executive director of the Connecticut-based Gasoline & Automotive Service Dealers of America, commonly known as GASDA.
Fox, whose organization represents roughly 500 stations, is urging state officials to decouple the diesel tax from a formula that resets the levy every July 1. Similarly, GASDA also wants the state to reform a second tax, a percentage-based levy that impacts the wholesale price of gasoline and that can vary considerably from year to year.
“If this isn’t the time,” Fox said, “it never will be.”
Lawmakers and Lamont already have delivered huge relief to motorists over the past 15 months.
They suspended the entire retail tax on gasoline, a fixed 25 cents per gallon, between April 1 and Dec. 31 of last year. And they also waived a portion of that tax between Jan. 1 and April 30 of this year.
The 13-month holiday, ordered to help motorists recover from a 40-year high in the national inflation rate, saved drivers an estimated $330 million in the aggregate.
The governor and legislature took a second step in early June, freezing the diesel tax for one year at 49.2 cents per gallon and saving consumers $37 million. Absent that action, the diesel tax was set to rise by 12 cents on July 1, according to Department of Revenue Services Commissioner Mark Boughton.
“We are constantly looking for opportunities to lower the cost of doing business in Connecticut,” said Sen. John W. Fonfara, D-Hartford, co-chairman of the Finance, Revenue and Bonding Committee. “This change is certainly a big step in that direction, as fuel costs are a significant percentage of expenses not only for the trucking industry but for all markets that rely on the sale of goods.”
But some say Connecticut can afford to do even more.
Despite funding all of that relief, the Special Transportation Fund unofficially closed the last fiscal year last week with a $260 million surplus, according to the Lamont administration. Though the fiscal year ends on June 30, the comptroller doesn’t audit and close the books until early September.
With the exception of this July, the diesel tax has been adjusted annually each summer since 2007 based on a statutory formula that relies heavily on wholesale diesel prices from the prior 12 months.
And while it hasn’t always led to large increases, it forced a 9-cents-per-gallon increase one year ago.
Many economists say most increases in transportation costs are passed directly onto consumers by supermarkets, department stores and other retailers that rely on trucks to receive their goods.
Freezing the diesel tax at its current level, and also converting the wholesale gasoline tax from a percentage-based levy into a fixed amount of pennies per gallon, would be a big boost for motorists, gas station owners and consumers, Fox said.
And that’s not the only industry seeking relief.
The Connecticut Energy Marketers Association, which represents fuel distributors across the state, also has been pushing for years to remove the volatility from Connecticut’s fuel tax system.
Had the governor and legislature not acted this June, the diesel tax would have jumped 21 cents in 13 months, noted Chris Herb, CEMA’s president and CEO.
“We don’t desire to see prices bounce around,” he said, adding it “puts a strain on businesses’ credit lines while often exacerbating retail prices during the worst periods of inflation.”
And it’s not just fuel taxes that are drawing increased attention.
Minority Republicans in the state House and Senate have been pushing for the past two years to repeal a new highway mileage tax imposed on large commercial trucks, excluding those in the dairy industry.
The highway tax, which took effect Jan. 1 and is expected to generate $90 million annually, is simply another transportation expense that will make already expensive goods in Connecticut even more unaffordable for many poor and middle-income households, the GOP argues.
Legislators need to remember that while state government is flush with cash, most Connecticut families “aren’t generating more revenue than they expected on their household budget,” said Senate Minority Leader Kevin C. Kelly, R-Stratford.
While Lamont and his fellow Democrats in the legislature blocked efforts to repeal the highway use tax, the battle will resume when the regular 2024 session starts in February, added House Minority Leader Vincent J. Candelora, R-North Branford.
“I’m not going to give up on it,” he said, predicting more rank-and-file Democratic legislators may be willing to support repeal as inflation continues to take a toll on their constituents. “I think that once they understand the impact, they may be willing to have that discussion.”
Rep. Maria Horn, D-Salisbury, the other co-chair of the finance committee, predicted her committee would be willing to take a closer look at removing volatility from diesel and wholesale gasoline taxes next session.
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