Friday, June 6, 2008

Gov. May Suspend The Increase In The Gas Tax

The tax in Connecticut is known as the Gross Receipts tax, and Governor Rell has called its timing "not good." The increase in this tax was proposed some time ago before the current energy crisis and seemed like a good idea. The money was supposed to be used to make improvements to the public transportation system that is now reaching full capacity during peak hours.

The tax was expected to go up from 7% to 7.5%. This would have marked an increase of yet another 3 or 4 cents per gallon. Governor Rell who told the legislature that she cannot control the price of oil or what goes on in the world market, has merely relayed our concerns to federal leaders in Washington.

The problem now becomes what will the state do to address “the Office of Policy and Management who advised Governor Rell that the next fiscal year - which begins July 1 - was projected to face a shortfall of about $150 million." The increase on the gas tax was expected to regain 25 Million of that loss.

There were few critics of the Governors plan, except for one person. According to Christine Stuart a reporter at the state capitol "Jonathan Pelto, a former state legislator turned public relations specialist, said in an email that already the gross receipts tax is bringing millions more into the state than initially anticipated in 2007 when the current state budget was passed.

He said when the legislature passed the budget it expected to bring in $287 million in 2008 and $311 million in 2009 on the gross receipts tax. Because the tax is a percentage of the wholesale price of gasoline, the budget estimates were based on the wholesale price of gas at $2.41. He said today the wholesale price of gas is $3.40, which means it will bring in at least $53 million more than expected this year.

“Even if gas prices don’t increase at all from this point forward—the most basic simplistic assessment reveals that in FY 09, the General Fund will not receive the $311 million (that was projected last June) but will actually receive well over $410 million,” Pelto said in an emailed statement titled, “Reality Check on Gas Tax Issue.”

The people of our state are already burdened with the highest gas prices in America, Connecticut is losing business and trucking companies are going under. The entire recreational boating industry has also been impacted negatively and there appears to be no relief in sight.

The federal government appears to be imposing new energy and greenhouse gas regulations that are only going to impede the price of gas further. The quagmire we are now in is so desperate that analysts at "Goldman Sachs" are expecting oil to reach as high as $150-$200 a barrel.

Congress thus far has threatened a lawsuit against OPEC, ostracized the top executives at the big oil companies, is attempting to bar speculative investors in oil, and in a chilling cliche imposed strict environmental standards that prevent the exploration of oil in our own country. Clearly our country appears to be paralyzed by its own internal strife between consumers and environmentalists.

The question here remains is whether or not our state truly did receive all that extra cash, or did Connecticut just break even due to people driving less? I have no knowledge of Peto's assessment relative to consumer driving habits in this high price environment. If consumers are like the typical people I know, then they have indeed cut back on driving, as many local gas station operators have also suggested has happened. The immutable laws of supply and demand also apply to the state and Connecticut should be aware that raising gas prices will push consumers into energy conservation that will result in even less sales revenue and higher future taxes.

All it takes is for one to look out their own window and see the surge in 30+ MPG cars, and the decline of the SUV now worth less than ever before. Ford has even indicated that their gas guzzlers, like bad mortgages are "upside down" time to pay attention to the big picture, and not "band aid" holes in the budget.

The problem is difficult, but solvable through innovative means in these troubling times, including a serious effort to eliminate government waste and questionable jobs and departments.

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