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Legislators take aim at tax in effort to ease pain at pump

By JC Reindl

Publication: The Day

Published March 20. 2012 4:00AM   Updated March 20. 2012 3:12PM
Initial focus placed on cutting and capping of gross receipts levy

Hartford - Democrats and Republicans in the legislature are now both on board with the idea of cutting and capping one of the two taxes in Connecticut on gasoline.

At a Monday news conference in the parking lot of the state Capitol, Democratic leaders announced their multipoint plan aimed at easing the pain of rising fuel prices.

The first step to the legislation would place a temporary cap on the petroleum gross receipts tax. This tax is paid by wholesale fuel distributors but gets passed along to service stations and then to motorists.

Unlike the state's better-known flat tax of 25 cents per gallon, the gross receipts tax fluctuates with the wholesale cost of fuel and brings in more taxes as prices climb. It has an effective rate of 7.53 percent that, at current wholesale prices, adds 24 cents to the retail cost of a gallon.

Together, both state taxes add nearly 50 cents per gallon at the pump.

The proposed legislation would cap gross receipt taxes at $3 per wholesale gallon. With the current wholesale price of $3.18, the cap would in theory produce immediate savings of about 1.3 cents a gallon.

'"We understand in Connecticut there's only so much that we can do when prices in so many ways are being driven by external factors," state Senate President Donald Williams, D-Brooklyn, said. "But at the same time, we know that we need to do everything we can possibly do at the state level to provide relief and also guard against future unnecessary price-gouging increases."

The average retail price across the state Monday was $4.01 per gallon, or 15 cents higher than a month ago, according to the Daily Fuel Gauge operated by AAA. Nationwide figures showed Connecticut in a three-way tie with New York and Washington state for the fourth highest gas prices in the country.

Democrats declined to estimate how much money per gallon their plan could save motorists, saying there are too many variables to gas prices to speculate.

"This is to guard against significant increases in the future," Williams said.

Republican have at various times proposed capping the gross receipts tax - at least on eight occasions in the past four years, according to House Minority Leader Lawrence Cafero, R-Norwalk. But until Monday, the concept lacked bipartisan consensus.

Speaking to reporters in the sun-drenched parking lot, Cafero called on Democrats to speed their tax cap bill through the General Assembly via a process known as emergency certification.

State Republicans had planned to use Wednesday for rolling out their latest gross receipts tax cut-and-cap plan. They accused Democrats of organizing a hasty "reactionary press conference" to steal their thunder Monday and score political points in an election year.

"As my father always said, you have to admire a person who admits they're wrong and has the courage to change their mind," Cafero said. "Just a few days ago … it was said by members of the Democratic leadership that this was nothing more than politics. But fortunately, I think, they have realized that people out there are angry and frustrated and are looking to government to do something."

The Democrats' gross receipts tax cap would sunset on June 30, 2013 - the day before the rate on the gross receipts tax is scheduled to jump to 8.1 percent. GOP legislators want to see the cap made permanent.

Williams said the General Assembly can decide next year if it makes sense at that point to extend the cap.

The Senate president argued that Democrats' plans go further than Republicans' because their proposal contains provisions to stop fuel wholesalers and distributors from passing along costs to consumers beyond the level of the cap.

Doing so would become a violation of the Connecticut Unfair Trade Practices Act.

The Democrats' proposal would also:

• Add an automatic trigger to the petroleum profiteering law. If prices of wholesale fuel increase by more than 15 percent over 90 days, the state Attorney General could examine every step in the fuel supply chain to root out price-gouging. Giving an example of egregious behavior, Williams said that some oil tankers allegedly wait outside New Haven harbor for opportune prices before coming in to dock.

• Open an immediate price-gouging investigation. "We've seen the price go up at the wholesale level 42 cents per gallon in less than 90 days," Williams said. "That's unacceptable. There's no supply-and-demand issue driving that price increase, that's pure Wall Street speculation."

• Grant new authority to the Department of Consumer Protection to impose fines up to $10,000 on gas wholesalers and distributors who violate the profiteering law.

• Establish profiteering protections for home heating oil, which Williams said are suspiciously high.

The gross receipts tax produced $334 million in revenue last fiscal year for state coffers that was about split between the General Fund and the Transportation Fund, which finances roads and bridges.

House Majority Leader J. Brendan Sharkey, D-Hamden, acknowledged that the tax cap proposal could cut into state revenue but said it wouldn't be fair for government to benefit from high prices that hurt residents.

"This is more than a gesture," Sharkey said, "this is forcing the state to live within its means by capping the amount of revenue that we can take in from the gasoline tax."

j.reindl@theday.com

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