Connecticut is third state to approve fuel tax holiday; others pursue action

March 25, 2022

Keith Goble

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The state of Connecticut has joined the short list of states to take action to provide a fuel tax holiday for at least certain drivers.

On Thursday, March 22, Gov. Ned Lamont signed into law a bill to give motorists a three-month holiday from paying the state’s 25-cent excise tax on gas. The law does not affect the 41.1-cent excise tax on diesel.

The gas tax holiday begins April 1 and runs through the end of the fiscal year – June 30.

Suspension of the gas tax for three months will cost the state $90 million.

Language included in the bill is intended to ensure cost savings are transferred to customers. Failure by retailers to reduce the gas price by the full 25 cents per gallon during the suspension period would be considered an “unfair or deceptive trade practice.”

Some legislators, including Rep. Tom Delnicki, R-South Windsor, asked for the tax suspension to include diesel. The diesel tax provision did not have enough support.

The Democratic governor praised both parties for getting a deal done quickly.

“With this bipartisan action, we are taking steps to provide some relief to consumers as they face rising prices due to a number of international dynamics and market instability that go far beyond our state,” Lamont said in a news release.

Other states to take action in past week

Connecticut’s approval of a gas tax holiday follows similar action taken in recent days in Georgia and Maryland.

On March 18, Maryland Gov. Larry Hogan was the first governor to take action on a fuel tax holiday.

State law authorizes fuel rates to be adjusted each July based on the consumer price index. Since July 1, 2021, the gas tax has been set at 36.1 cents and the diesel rate at 36.85 cents.

The Republican governor signed into law legislation to suspend collection of the state’s fuel rates for 30 days. The tax holiday took effect immediately and runs through April 16.

Suspending collection of fuel taxes is estimated to cost the state $100 million.

Advocates say the lost revenue would be covered by dipping into the state’s $7.5 billion budget surplus.

Hogan has since said it may be necessary to extend the tax holiday beyond the original 30-day time period.

Georgia

Georgia Gov. Brian Kemp has also signed into law a tax holiday for his state.

Georgia collects a 29.1-cent gas tax and a 32.6-cent diesel tax.

Legislation signed into law immediately suspends collection of the state’s fuel taxes through May 31.

The Republican governor said the state is in a good position to provide a tax break because of a $3.7 billion budget surplus through fiscal year 2021.

Other states pursue tax breaks

In California, Assembly Democrats want to help residents combat high gas prices.

A group of 21 Assembly members want to tap into the state’s budget surplus to send rebate checks to all California taxpayers. The proposed amount for each taxpayer is $400.

“We believe a rebate is a better approach that suspending the gas tax – which would severely impact funding for important transportation projects and offers no guarantee that oil companies would pass on the savings to consumers,” their letter to legislative leaders reads.

The rebate checks would be sent to every California taxpayer, regardless whether they own or drive a vehicle.

The proposal is estimated to cost the state $9 billion. The state’s budget surplus would be tapped to cover that amount.

Meanwhile, statehouse Republicans continue to call for a gas tax holiday.

Democratic Gov. Gavin Newsom has said he supports some relief from high fuel prices.

Newsom supports a rebate plan. He also wants to pause a portion of the sales tax rate on diesel and suspend the inflationary adjustment on gas and diesel excise that is set for July 1.

Newsom wants to send debit cards to drivers of gas-powered vehicles and electric-powered vehicles.

His proposal has a more than $10 billion price tag.

In addition to $9 billion in tax refunds, up to $600 million would be necessary to pause a part of the sales tax rate on diesel for one year. Another $523 million would be used to pause the inflationary adjustment to gas and diesel excise tax rates.

His office is expected to meet with the Legislature in the coming days to negotiate the details.

 

Massachusetts

In Massachusetts, the state Senate on Thursday, March 24, shot down a proposal to suspend the fuel tax.

A Republican-led initiative called for pausing fuel tax collections through Labor Day.

Majority Democrats said they are opposed to the plan and raised concerns about violating the terms of the state’s bond agreements.

Gov. Charlie Baker has not endorsed a break in fuel taxes. The Republican governor has expressed concern about how tax breaks in nearby states could “disadvantage” Massachusetts drivers.

Pennsylvania

Two Pennsylvania Republicans have introduced bills to provide fuel tax relief to consumers.

Sen. Jake Corman of Bellefonte and Rep. Tony DeLuca of Allegheny are sponsoring bills to suspend fuel tax collection.

DeLuca’s bill would suspend the state’s 58-cent tax on gas and the 74-cent tax on diesel for six months. The state would be responsible for identifying how to mitigate the revenue loss.

“The pain at the pump from rising gas prices is hitting Pennsylvanians’ wallets and our way of life – from more expensive commutes to paying more to distribute goods,” DeLuca stated.

DeLuca said if nearby states that include Maryland can take action to relieve drivers from higher fuel prices, Pennsylvania should do the same.

“If Maryland can help consumers reduce their gas prices by 46 cents per gallon, imagine the relief we can bring Pennsylvanians by suspending our 58-cent gas tax and 74-cent diesel tax.”

Corman’s plan is to trim fuel taxes by one-third through the end of the year.

The state would tap a mix of federal funds and a bond issue to cover the revenue loss.

The bills are SB10 and HB2453.

IFTA effect

Pursuit at statehouses for fuel tax holidays that would include diesel have drawn the attention of the trucking industry.

Professional drivers want to know what a tax break would mean for paying their fuel tax through the International Fuel Tax Agreement.

IFTA Executive Director Carmen Martorana recently told Land Line Media that drivers wouldn’t have to pay state fuel tax if they are buying and burning the fuel in a state that is not collecting the tax.

Martorana pointed out that drivers who buy fuel in a state with a fuel tax exemption and drive in a state without an exemption, drivers would have to pay that tax out of pocket.

She added that if a driver pays taxes on fuel in one state, but then drives in a state that has a tax holiday, they can get reimbursed.

Governors call for federal action

Six Democratic governors have called on Congress to act to suspend collection of the federal gas tax through the end of this year.

The governors of Colorado, Michigan, Minnesota, New Mexico, Pennsylvania, and Wisconsin say general fund money could be used to cover lost gas tax revenue.

“At a time when people are directly impacted by rising prices on everyday goods, a federal gas tax holiday is a tool in the toolbox to reduce costs for Americans, and we urge you to give every consideration to this proposed legislation,” the governors wrote to congressional leaders. LL

Land Line Media reporter Ashley Blackford contributed to this report.

More fuel tax coverage

Keith Goble, state legislative editor for Land Line Media, keeps track of efforts at statehouses around the country to provide relief from higher fuel costs. Here are some recent articles by him.

TBS

Keith Goble has been covering trucking-related laws since 2000. His daily web reports, radio news and “OOIDA’s State Watch” in Land Line Magazine are the industry’s premier sources for information regarding state legislative affairs.