State drivers could face gas tax hike
Lamont move could raise per-gallon price as much as 17 cents
Gov. Ned Lamont has signed on to a regional climate initiative, which if approved by the General Assembly would likely result in the first hike in the state’s gasoline tax since 2000, though in an indirect way.
The higher prices would be determined not through a direct levy imposed by the state, but rather by diesel and gasoline wholesalers participating in the quarterly auction of credits required by the multistate group.
The credit system would likely raise costs at the pump by at least a nickel a gallon. Opponents charged on Monday that price increases would be much higher, possibly 17 cents per gallon in the first year.
The goal of the Transportation and Climate Initiative Program is to rid the air of carbon emissions,
while promoting mass transit and cleaner travel options, including electric cars. It could raise about
$300 million a year for the new programs across more than a dozen states in the Northeast and Washington, D.C.
If the program works as planned, overall fuel use would decline and the added costs could eventually go away — though Connecticut would still need to raise money to fund highway and transit costs.
“You know me, I like to work on a regional basis, especially when it comes to things like climate,” Lamont said during his daily news briefing from the State Capitol. “This is going to go through a couple of twists and turns in the legislature before we get anywhere. I don’t ask for any gas tax increase, but the wholesalers will be buying credits if they exceed pollution limits.”
Motorists buying regular gasoline currently pay 25 cents per gallon directly at the pump, a levy that last changed in 2000, plus a wholesale tax of 8.1 percent paid by distributors and passed on to customers, which totals less than
13 cents a gallon at current prices, and raised about $240 million in
2017.
According to a July report by the American Petroleum Institute , Connecticut’s taxes are the 15th highest in the nation, but below the national average.
The added cost from the credit auctions would act like the wholesale tax.
Asked how much the effective gas tax might rise, Lamont sidestepped the question. “Think about it a little bit differently,” he told reporters. “There’s a cap on the amount of carbon and that’s how we make a big difference in terms of transportation-related particulates that get into the air and create a lot of the environmental damage. People would pay a premium in order to buy more of those credits. That’s at the wholesale level.”
Whatever the price for consumers, joining the multistate group would not address Connecticut’s immediate need to rebuild and repair highways and bridges, pay for transit subsidies and shoulder other transportation costs. The state’s Special Transportation Fund, which depends on taxes and fees, is expeced to run at a deficit over the next few years and become insolvent.
To fix that, Lamont had proposed highway tolls in 2019 and again early this year, but was unable to get a plan through the General Assembly, as Republicans opposed tolls unanimously and Democratic leadrs did not bring any of the governor’s proposals to a vote.
Market-based, but who pays?
Rather than charging consumers the nickel a gallon, Lamont said wholesalers might take the five-cent loss to stay competitive at the pump — though that doesn’t tend to happen now with the wholesale tax.
“I presume it would be passed on to the consumer, just like many taxes are passed on to the consumer,” said state Rep. Jason Rojas, D-East Hartford, the current co-chairman of the tax-writing Finance Committee who will be the next House Majority Leader when the General Assembly convenes on Jan. 6. “If you look at the intent, everyone can agree there are laudable goals, but the problem we have often in the legislature is how to pay for them.”
It’s unclear whether majority Democrats in the House and Senate will support it. Republican opposition would likely be steadfast.
Katie Dykes, commissioner of the state Department of Energy and Environmental Protection, said in an interview Monday that the largest cities, including Bridgeport and New Haven, have asthma rates of up to 10 percent, mostly because of vehicular emissions.
“It’s a market-based mechanism to guarantee emission reductions,” Dykes said, stressing that a 26 percent reduction in emissions can be reached during the decade starting in 2023. “This program is going to enable investment in a transparent way with an equity advisory body to make sure those communities are the first in line for benefits.”
The whole point of the marketbased system, in which wholesalers make bids on credits to fund transit projects, is not to raise gas and diesel taxes, said Christopher Phelps, executive director of Environment Connecticut, an advocacy group.
“Of course, in theory oil companies could pass on their cost of purchasing allowances under the program,” Phelps said. “But that's not required. That also doesn't take into account the potential for the cap to push the market toward cleaner fuels and greater efficiency over time, or the ability for the state to invest the revenue in ways that reduce transportation costs for average folks.”
Opponents call it a money-grab
Incoming state Senate Minority Leader Kevin Kelly, R-Stratford, said Monday that he expects the higher tax would be about 17 cents per gallon.
“Merry Christmas, Connecticut,” Kelly said in a statement. “On the Monday before Christmas, Gov. Lamont has given a lump of coal to middle class families. This tax hike will burden middle class families' budgets at the absolute worst possible time without improving our aging transportation infrastructure. His holiday gift to Connecticut families is new and higher taxes.”
Joseph Sculley, who as president of the Motor Transport Association of Connecticut represents about 500 mostly Connecticut-based haulers, said Monday that he agrees the gasoline tax could rise as much as 17 cents in the first year and possibly increase to 45 cents over 10 years.
“As small businesses fighting for their lives, we are adamantly against it,” Sculley said in a phone interview. “This is about money for trains, buses and electric-vehicle subsidies. This isn’t about roads and bridges.”
He will lobby against the proposal when the General Assembly convenes on Jan. 6. “This is a memorandum of understanding and the MOU doesn’t have the force of law. Ultimately the legislature is going to have to vote on this.”
The initiative is more about raising money than cleaning the air, charged Chris Herb, president of the Connecticut Energy Marketers Association.
“If adopted, TCI will reduce greenhouse gases by a meager five percent while increasing gasoline prices by as much as 38 cents in the first year alone and by 61 cents in the next decade,” Herb said. “This would be the breaking point for many people in Connecticut already struggling to make ends meet and quite frankly, just trying to survive.”
States joining in
State Sen.Carlo Leone, D-Stamford, co-chairman of the legislative Transportation Committee, said Monday that it is important to mitigate the damage that car exhaust does to state residents. “The General Assembly is going to have a say on this, and we’ll have to figure out what the reality and what perceived savings are,” he said. “We could raise up to $70 million to reinvest into transportation.”
In recent years the state has raised about $500 million a year in gasoline taxes but that figure is expected to fall sharply as residents drive less in the COVID recession, use more fuel-efficient cars and as gasoline prices decline.
Connecticut on Monday joined Massachusetts, Rhode Island and the District of Columbia in the Transportation & Climate Initiative Program, aimed at modernizing transit in the Northeast and Mid-Atlantic regions and using proceeds for projects related to reduced carbon.
Other states are expected to join, including possibly New Jersey, New York, Vermont, Delaware, Maine, Pennsylvania, Maryland and Virginia, which are all involved in negotiations to join.
Lamont said in January he was backing away from the state’s commitment to the TCI that had been signed by his predecessor, former Gov. Dannel P. Malloy — along with 11 other northeastern and mid-Atlantic states. Lamont said during an WNPR radio show that raising the gas tax was “probably not the way to go.”
An analysis by the Caesar Rodney Institute’s Center for Energy and Environment indicated that an increase to the gas tax would cost about $260 per household in Connecticut, according to the Yankee Institute, a conservative think tank and registered lobbying organization.