With lawmakers promising more tax relief to come this session, a plan for a three-month gas tax holiday and free buses passed both chambers of the legislature without opposition on Wednesday – a move that should start to save Connecticut commuters some money starting in early April.
The legislature agreed to suspend the state’s 25-cent per gallon excise tax on gasoline from April 1 to June 30, make bus service in the state free for the same period, and exempt purchases of clothes and shoes under $100 from the sales tax for one week from April 10 to 16. Gov. Ned Lamont has already said he supports the measure.
The savings for individual consumers are expected to be modest. Hearst Columnist Dan Haar reported a typical two-car household would save about $50 on gas taxes – though the total savings would depend on how many gallons of gas someone buys.
The sales tax holiday – scheduled to coincide with many schools’ spring break – would save a customer the 6.35 percent tax on purchases of clothes and footwear under $100.
The savings could be more significant for regular bus riders – 9-Town Transit charges $1.75 for a single ride and $59 for a monthly pass, while CT Transit charges $1.75 for a single ride and $3.50 for an all-day pass.
State Rep. Sean Scanlon, D-Guilford, co-chair of the Finance, Revenue and Bonding Committee, said there were 2.1 million rides across Connecticut’s bus system last month, and said bus ridership never dipped below 50 percent during COVID, because the people who rely on buses are the people who had to physically go into work throughout the pandemic.
“They were the ones who were working two or three jobs that couldn’t work from home,” Scanlon said. “And when you compare that to the fact that Metro North [ridership] was down 95 percent, I think that tells the story of why we’re doing this.”
On the state’s end, the gas tax holiday is expected to keep $90 million in revenue out of the state’s special transportation fund. Comptroller Natalie Braswell reported this month that the transportation fund has a surplus of $382 million, and projected a surplus of $516 million by June.
“While we didn’t cause the problems – these are global issues, inflation, high cost of gas – our constituents will sit around and say, ‘Hey, these politicians in Hartford are throwing up their hands,’” Scanlon told reporters in a press conference Wednesday morning. “When we have $100 million more coming into our coffers, we can’t just throw up our hands and say nothing.”
Senate Minority Leader Kevin Kelly, R-Stratford, said the surplus in the transportation fund is a result of higher-than-expected sales tax revenues, which are a product of inflation pushing up the cost of goods, and sales tax in return.
Returning that money to consumers in the form of a gas tax holiday is a matter of fairness, he said. Kelly called for expanding the sales tax holiday on clothes, as well – saying the state has more “windfall” revenue from sales tax that it can return to shoppers.
The one-week sales tax holiday on clothes and footwear is projected to save customers – and cost the state – a total of $3 million. And the bill allocates $8.1 million of federal ARPA funds to fund the free bus service.
State Rep. Harry Arora, R-Greenwich, asked Scanlon if the state is prepared to extend the gas tax holiday and other measures for longer if gasoline prices remain high after June. Scanlon said that they will “remain committed to trying to help where we can on issues that are beyond our control,” but said there were limits to what the state can afford to do, despite the transportation fund’s surplus.
“I am confident that all of us in this room will continue working with our constituents, talking to our colleagues, and if and when we should revisit this, we will try to do that if we can,” Scanlon said.
State Sen. Will Haskell, D-Westport, co-chair of the Transportation Committee, said he would support the gas tax holiday, but said the idea of making it permanent is a “pro-pothole policy” – that it would jeopardize the state’s ability to pay for critical road and transit policies.
“I will be voting ‘yes’ tonight, but I’m going to be doing so clear-eyed about the fact that this is a short-term solution,” Haskell said. “This won’t help us next time that gas prices go up. This doesn’t help us escape our dependence on the oil and gas industry.”
Gas stations warn of delay at the pump
While support for the tax holidays was unanimous, one pushback came from gas station owners who warned that they would not be able to pass the gas tax break onto customers immediately unless the state refunded them for the taxes they already paid for fuel in their tanks.
The gas tax isn’t charged to customers at the pump. Station owners pay it when they buy fuel for their station. Depending on how much traffic an individual station has, it could be days before the owner buys more gas without tax, said Chris Herb, president of the Connecticut Energy Marketers Association, which represents gas station owners.
“Customers will be told that the tax holiday is starting April 1, yet they won’t see savings at the pump for days, if not over a week in rural areas of the state,” Herb said. “Anywhere you have smaller populations, gas stations may take a week or more to sell off all their fuel before anyone sees the 25-cent savings.”
If a station holds 20,000 gallons of gas, that’s thousands of dollars in tax liability that the gas station owners can’t just fit into their profit margin, Herb said.
He said that’s unfair to the customers of those stations, and it’s unfair to the station owners, as customers will go to stations that are able to lower the price sooner. That’s okay when it’s just a function of competition, but not when it’s a result of “poor tax policy,” Herb said.
Scanlon said the reason the gas tax holiday starts April 1 instead of immediately is to give station owners a chance to cycle through their supply so that they can pass the savings on sooner.
But Herb said that approach would lead station owners to wait until after April 1 to re-fuel if their tanks run dry before then. The distribution system wouldn’t be able to supply the roughly 1,400 gas stations across the state if they all are trying to re-supply at the same time, which would lead to outages. Confusion and frustration would fall on the backs of station owners and employees, he said.
“Our first concern is that consumers aren’t going to get the benefit of this for some period of time,” Herb said. “The second concern is that this will be taken out on these local, family businesses. Refiners like Exxon and Shell and these large companies are prohibited by law from owning and operating gas stations in Connecticut. So when you fill up, you’re typically doing business with a family-owned business, and they’re going to bear the brunt of public confusion and anger.”