Opinion: Connecticut’s Gas Holiday

Connecticut’s Gas Holiday

BY: JAMIE HICKEY

As of April 1, emergency legislation went into effect with a unanimous vote from the state’s house and senate, suspending the Connecticut’s excise tax of $0.25 per gallon on gas. The suspension is set to run until November 2022, and it expects all retailers to reduce their per gallon rate, accordingly; failure to do so would be classified as an “unfair or deceptive trade practice.” Georgia, Maryland, and New York have also implemented or have plans to implement a suspension of the excise sales tax on gas in the coming months. Now, what exactly is an excise tax? It is a tax imposed on goods or services and can be imposed upon the manufacturer, retailer, or consumer. In Connecticut, the gasoline excise tax is imposed upon the sale of gasoline and goes toward the State’s annual budget. Retailers pay this tax upon purchasing the supply needed and directly pass the cost on to consumers. Connecticut gasoline prices also include the US federal motor fuel excise tax of $0.18 per gallon, which goes toward the funding of the Federal Highway Administration. These excise taxes are already intertwined with the prices consumers see at the pumps, and with the suspension of the state tax, Connecticut lawmakers hope consumers have some form of relief from these record-high prices. With the focus on consumers’ benefits, many overlook the impact

Figure 1: U.S. Regular All Formulations Retail Gasoline Prices Dollars per Gallon

on local gas station retailers. As of April 1, gas stations were expected for their cost per gallon to be down $0.25; however, most of these retailers already paid the tax when they purchased their supply, it was expected that retailers would lose $3.5 million on the first day of the tax holiday from not being able to charge consumers for the tax they had already paid. Many retailers are trying to stay afloat just like consumers, and although they support this tax holiday, they want lawmakers to make this right. Maryland, for example, offered gas station credits when implementing their gas holiday, and local gas stations here in Connecticut hope they can achieve the same. Another thing to keep in mind about the tax holiday is the period it will end. As you can see from Figure 1, gas prices tend to be higher in the warmer months as more consumers go out and do things. In combination with likely higher gas prices as spring and summer progress, the tax holiday ending, and gas stations wanting to make up for lost revenue, it is expected that Connecticut gas prices will be extremely high, and it might be in the state’s best interest to follow other states’ plans. For example, Connecticut should extend the tax holiday until the end of the year like in New York; this will eliminate the $0.25 increase adding to an already higher gas price season. The state should also follow Maryland in offering gas station credits so gas station owners are not suffering from offsetting consumer costs.

https://fred.stlouisfed.org/series/GASREGW https://www.forbes.com/advisor/personal-finance/which-statessuspending-gas-tax/ https://www.salestaxhandbook.com/connecticut/gasoline-fuel https://www.irs.gov/businesses/small-businesses-self-employed/excisetax https://ctmirror.org/2022/03/30/ct-gas-tax-holiday-is-causingconfusion-for-locally-owned-stations/

Jamie Hickey ’22

Major: Behavioral Economics with a Finance Minor Hometown: Port Jefferson, NY