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Speedy passage given to cap on gas tax

By JC Reindl

Publication: theday.com

Published March 28. 2012 11:55AM   Updated March 29. 2012 7:08PM
Legislators show strong support for tax-capping measure that begins to save money at the pump

Hartford — A bill that will put a price cap on one of two state gasoline taxes sped through both chambers of the General Assembly Wednesday afternoon and soon could begin saving motorists almost a penny-and-a-half per gallon at the pump.

State Sen. Paul Doyle, D-Wethersfield, told legislative colleagues that the reason for the cap isn't to give significant, immediate relief, but to provide motorists with some cushion against big spikes in gas prices.

"No one will see radical differences at the pump," Doyle said. "The protection is for the future."

The cap affects the petroleum gross receipts tax, which currently adds about 24 cents to the retail cost of a gallon of gas, and fluctuates with wholesale fuel prices.

The state's other gas tax — a flat 25 cents per gallon — will stay the same, as will the federal tax of 18.4 cents per gallon.

All 36 senators voted for the cap as part of a multipronged legislative package assembled by Democrats. Other parts of the bill contain measures for preventing state-level price gouging in motor vehicle fuel and home heating oil. The bill passed the House on a 146-0 vote.

A spokesman for Gov. Dannel P. Malloy said the governor supports the bill and intends to sign it into law, but gas prices are largely beyond the control of state government.

While some Republicans, including Rep. Chris Coutu, R-Norwich, have hankered for years for a permanent gross receipts tax cap, the idea gained quick popularity last week with Democrats, who hold commanding majorities in the House and Senate.

The resulting bill motored through the legislative process under the emergency certification process, without time-consuming committee stops.

An early version of the Democrats' plan had a temporary cap expiring in July 2013. However, the bill that passed Wednesday would establish a permanent cap.

The cap is projected to cost state government nearly $5.5 million in lost tax revenue next fiscal year.

The gross receipts tax is paid by wholesale fuel distributors, but gets passed along to service stations and then motorists. It has an effective rate of 7.53 percent that is applied to the wholesale price of a gallon of gasoline.

The bill caps the tax at $3 per wholesale gallon, so prices above that would not be taxed. At the recent Connecticut wholesale price of $3.18 per gallon (now rising), the cap would in theory produce savings of about 1.3 cents per gallon.

The average price at the gas pump Wednesday was $4.06 per gallon, 12 cents more than a month ago, according to the Daily Fuel Gauge Report operated by AAA.

State Sen. Andrew Maynard, D-Stonington, said the immediate savings from the cap won't amount to much, although the bill as a whole should give additional protection to motorists going forward.

Maynard noted how the legislature cut the state's per-gallon flat tax by 7 cents in 2000, yet prices only have skyrocketed since then due to external factors.

"Frankly, my worry is that speculation and market forces beyond our control will eclipse anything we can deliver to reduce prices," he said.

Democrats voted down Republican amendments aimed at stopping a scheduled jump in the gross receipts tax to 8.1 percent in July 2013. Eliminating that increase would cost state government as much as $55 million in annual revenue, according to the nonpartisan Office of Fiscal Analysis.

The gross receipts tax produced $334 million in revenue last fiscal year. That money was roughly split between the General Fund and the Transportation Fund.

j.reindl@theday.com

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WHAT ELSE WILL THE BILL DO?

On the consumer protection side, the bill also will:
• Add an automatic trigger to the petroleum profiteering law, so if wholesale fuel prices rise by more than 15 percent over 90 days, the state Attorney General can examine every step in the fuel supply chain for price-gouging.
• Prohibit oil wholesalers and distributors from passing on anything purporting to be based on the tax for the portion of any sales price over $3 per wholesale gallon.
• Grant new authority to the Department of Consumer Protection to impose fines up to $10,000 on gasoline wholesalers and distributors who violate the profiteering law.
• Extend similar profiteering protections to home heating oil

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