The Connecticut House and Senate each approved a bill early Thursday morning that adds to the state's existing $150 million deficit by cancelling a scheduled increase in the state's tax on wholesale earnings from gasoline sales. Governor Rell is expected to sign the measure. The bill prevents what would have been a 0.5% increase in the petroleum wholesale earnings tax, which industry lobbyists are claiming would have increased prices at the pump by about 5 cents.
Even if the industry's 5 cent figure is taken at face value, few observers are seriously suggesting that this bill will do anything to improve the financial situation of Connecticut families. During the brief debate that occurred earlier this year over a proposed suspension of the 18.4 cent federal gas tax, that plan was heavily criticized for only providing the average driver with a $30 tax cut. The Connecticut bill would save drivers less than a third of that amount, though it would drive state government millions deeper into debt. Despite the fact that this would only provide a negligible tax cut for the average family, one legislator insisted that it is important to "let our citizens know that we are very concerned about what they're up against" - an unsurprising sentiment given that this is an election year. Pure political motives are the only explanation for why a token gas tax cut is so high on lawmakers' agendas despite the existence of a state government deficit and numerous fiscal problems in many Connecticut counties.
But perhaps even more worrisome than cutting taxes in the face of a deficit is that Connecticut lawmakers have decided to play politics with a very serious issue affecting low-income families. Even if Connecticut legislators don't want to fix their state's regressive tax system, there are still much better options for assisting families hurt by high fuel costs. Instead of providing an across-the-board tax cut that benefits both Connecticut's wealthiest, as well as its poorest families, a targeted low-income gas tax credit of the type enacted in Minnesota could have distributed more gas tax relief to lower-income families at a similar cost. Lawmakers need to admit that the most dramatic impact of the recent economic slowdown has been on lower-income families struggling to make ends meet. Until then, more poorly targeted and gimmicky tax cuts of the kind passed in Connecticut can be expected.