State Senator David J. Cappiello, R-Danbury, today said that legislation that he proposed to stop the scheduled July 1st increase to the gross receipts tax on gasoline has cleared the legislature’s General Law Committee. According to Sen. Cappiello, the amendment, which unanimously passed the committee, would also prohibit future increases on the tax from occurring. He said that since 2005, the tax has increased three times and is scheduled to be increased another two times in the next five years.

“This is an insidious hidden tax that was put into place when the price of gasoline was at $1.50 a gallon. We talk about price gouging at the pump all the time, but the biggest culprit is the state of Connecticut,” said Sen. Cappiello. “Every time the price of gasoline increases the state collects more money and to increase the rate at a time when gas prices are approaching $3.50 a gallon is really beyond belief. We simply cannot allow these increases to happen.”

The petroleum products gross receipts tax is imposed on the first sale of petroleum products in the state. Because the tax is based on the wholesaler's selling price, it increases the wholesaler's costs. This then affects the price they charge to retailers and is ultimately passed on to consumers at the pump. Thus, the higher the price of oil, the greater the percentage of tax receipts the state receives.

Sen. Cappiello said that since 2005 the state has taken in an additional $141 million from the gross receipts tax. In 2008, the state expects to take in a record $320 million from the tax. The current tax rate is 7%, up from 6.3% last year. The scheduled July 1st increase would raise the rate up to 7.5%. According to AAA, the current statewide average for regular unleaded gasoline in Connecticut is $3.37 a gallon compared to $2.71 cents a year ago. When combining the tax per gallon along with the gross receipts tax and federal taxes, Connecticut has the highest gas tax in the northeast.

“We are literally taking in more money from the gross receipts tax than we need to maintain our transportation needs in the state,” said Sen. Cappiello. “The state is already getting more money than it ever projected, so to allow these rate increases to continue is nothing short of price gauging by the state and the taxpayers are the ones who are getting fleeced. It’s wrong, and we need to put an end to it.”

Sen. Cappiello’s amendment was attached to SB 521, An Act Concerning Price Gouging. The legislation now heads to the floor of the Senate.