The trucking industry, petroleum dealers and others are bracing for a possible double-digit increase in Connecticut’s diesel tax on July 1. The regularly scheduled adjustment comes as diesel prices are rising across the state.
Connecticut's Department of Revenue Services has until June 15 to determine the updated rate for the tax, which is currently 40.1 cents per gallon. State law requires that it be adjusted annually, based on a complex formula that takes into account daily fuel prices at two terminals over the prior 365 days.
The state's fixed price diesel tax was created more than a decade ago to provide predictability for businesses. But this year, it's unclear what the new rate will be, considering the sharply rising prices. Some have predicted the new rate could increase by as much as 20 cents.
“No one knows what it’s going to be in advance, when July 1st comes, until they make that announcement,” said Chris Herb, president and CEO of Connecticut Energy Marketers Association, on Wednesday. “So that’s the confusion right now, is we don’t know how much more we’re going to have to pay to ship products.”
Herb called on the General Assembly to reconvene and stop the looming tax increase.
“I think if anything dictates that there should be a special session, it's this one because this is hurting every person in the state on every product that’s sold,” he said. The average price of a gallon of diesel in Connecticut was $6.189 on Wednesday, according to AAA.
Katie Childs, vice president of Tuxis Ohrs Fuel in Meriden, a fuel delivery company, said her family business sells about 15 million gallons of diesel each year. She said a 10- to 15-cent increase in the state tax equates to about $1.5 million more in taxes. She said the state's new highway use tax, which begins in 2023, will cost another $500,000.
“We've already done what we can to absorb the inflationary expenses,” Childs said, predicting that 100% of “all of these new taxes that are coming in” will be passed on to her customers in Connecticut.
Both Childs and Herb attended a news conference Wednesday organized by Bob Stefanowski, the endorsed Republican candidate for governor. The issue of taxes, including the diesel tax, has become a top issue in this year's election. GOP lawmakers on Tuesday called for a special legislative session to cut taxes beyond the roughly $500 million in changes included in the newly adjusted state budget that was approved by mostly Democrats.
On Wednesday, Stefanowski called for suspending the 40.1-cent diesel tax until the end of year. That would be similar to how the General Assembly and Democratic Governor Ned Lamont suspended a 25-cent-per-gallon tax on gasoline until December. Stefanowski is also proposing other tax changes, including a reduction in the sales tax, elimination of a 1% surcharge on prepared meals and suspension of the gross receipts tax on gasoline and cancellation of the new mileage tax on large trucks.
Max Reiss, spokesperson for Lamont, said, “Right now a special session is not on the table.” Rather, he said, the administration is focusing on implementing the various tax reductions that are set to take effect in the new fiscal year.
