The truth behind Connecticut's gas prices: Part 1

Jun 7, 2013

Ever wonder why gas prices are so high in Connecticut? A lot of it has to do with state gas taxes very few people know about – taxes that are about to undergo a steep increase. 

So, last week I paid $3.79 per gallon of gas at a North Haven gas station. This made me angry. And I asked my fellow gas-guzzlers – who’s to blame?

“I can’t determine what’s going on or what’s causing it," said one customer.

“People are making money off it," said another. Other culprits were "oil from the Middle East" and "Saudi Arabia." 

Nobody mentioned Connecticut’s gas taxes.

Some people knew about the retail gas tax, which is 25 cents a gallon. But you actually pay around 47 cents a gallon in Connecticut gas taxes for every gallon you buy. So what’s the deal with that?

As Keith Phaneuf, a reporter for the Connecticut Mirror, explains it, “most people aren’t aware that there are even two different state taxes that affect the price of gasoline.”

These two state taxes are the retail tax – 25 cents a gallon – and then there’s this other tax, Phaneuf explains. 

It's called: "The petroleum products gross receipts tax. That’s just a very fancy name for a wholesale tax on gasoline and other fuels."

That tax is effectively 7.5 percent of the wholesale price of gas. Today, that amounts to 22 extra cents per gallon. Connecticut’s actually been collecting this wholesale tax for decades. Back in 1980 the state needed a fund for cleaning up oil spills and wanted to tax those profitable oil companies.

Ultimately, that’s not really how it worked out.

The oil companies said – we don’t want to pay this tax. We’re just going to pass it on to the gas stations. Who then pass it on to you at the pump.

And for a while, gas station owners tried to fight back – they had these white stickers explaining the breakdown of gas prices and taxes. But a percent tax makes that pretty confusing. Today a sticker might read: Federal tax: 18.4 cents. State retail tax: 25 cents. Wholesale tax…7.5 percent?

As Mike Fox of the Gasoline and Automotive Service Dealers of America explains it, “Here’s the problem with those stickers. You gotta make a sticker with a sliding number on it, because the number changes every day. As the wholesale price of gas changes, that tax changes.”

Fox says gas station owners are threatened with false advertising charges if they don’t display the final correct price of gas. But today the price, and therefore the tax, is so volatile that if you print a sticker in the morning, it could be wrong by nighttime.

Changing the sticker each day, he says, "would be cost-prohibitive.”

So that’s why a lot of my fellow gas-guzzlers didn’t know about this extra wholesale tax. They also don't know the tax is jumping up on July 1. 

It’s going from 7.5 percent to 8.8 percent. That means omewhere between 3 and 4 cents overnight will pop up on the price of gasoline.

So this little-known wholesale tax will cost you 26 cents a gallon. Along with the retail tax of 25 cents, that adds 50 cents in state taxes to every gallon of gas you buy.

In Part 2, we’ll dig into the history of this gas tax that was never supposed to cost consumers this much in the first place.