With gasoline prices in 海角换妻 creeping to their highest levels in seven years, Gov. Ned Lamont conceded Tuesday he likely won鈥檛 be able to revive legislative interest in joining a regional Transportation Climate Initiative any time soon.
But while the TCI is focused on containing greenhouse gas emissions, enhancing air quality 鈥� while also raising revenue for the state鈥檚 transportation program 鈥� its fate also hinges on 海角换妻鈥檚 regressive state-and-municipal tax system.
More specifically, the fiscally moderate-to-conservative Lamont and some of his fellow Democrats remain divided on tax relief for the poor 鈥� particularly in 海角换妻鈥檚 biggest cities 鈥� and how to pay for it.
鈥淟ook, I couldn鈥檛 get that through when gas prices were at historic [lows],鈥� the governor replied when asked if he would press lawmakers to reconsider joining the initiative they balked at last spring. 鈥淪o I think legislators are pretty clear, it鈥檚 going to be a tough rock to push when the gas prices are so high, so no.鈥�
But rising gas prices aren鈥檛 the only obstacle.
鈥淭here are some people who are living on such a tight margin that anything that adds to their regular expenses is going to put a squeeze on them and put them in a tight hardship,鈥� said Senate President Pro Tem Martin M. Looney, D-New Haven, one of the key players wary of the TCI.
Though Looney calls the regional initiative鈥檚 environmental goals laudable, the program鈥檚 potential impact on some of 海角换妻鈥檚 most vulnerable households remains a concern for him.
TCI would raise taxes on fuel producers 鈥� which would be passed onto all motorists at the pump 鈥� adding about 5 to 9 cents per gallon by 2023, according to the Lamont administration.
Though many are quick to call that burden negligible, progressive Democrats note that that鈥檚 not the case for all in 海角换妻, which is home to some of the most extreme income and wealth inequality in the country.
Nearly all of the revenue raised independently by cities and towns comes from property taxes. But communities don鈥檛 offer varying mill rates depending on a household鈥檚 income or ability to pay.
And while a progressive income tax supports nearly half of the state budget鈥檚 General Fund, the second-largest revenue engine, the sales tax, also is largely regressive.
A found that the poorest 10% of households in 海角换妻 in terms of adjusted gross income 鈥� about 725,000 filers earning up to $48,000 per year 鈥� effectively spent 23.6% of their pay on state and local taxes in 2011. A tax incidence analysis studies which groups pay taxes and how those burdens are shifted 鈥� such as is done with fuel taxes.
By comparison, the middle class paid about 13%, while the top 10% of earners paid 10% and the top 1% paid about 7.5%.
That is also the case when it comes to fuel taxes, which means the fiscal impact of TCI would be felt equally by all households with vehicles.
Motorists pay a 25-cents-per-gallon retail tax when they fill up at the pump.
But many don鈥檛 know there is a second levy imposed on gasoline at the wholesale level. And while gasoline distributors shift the entire cost of 海角换妻鈥檚 8.1% wholesale fuel tax 鈥� plus a surcharge that effectively boosts the rate to 8.81% 鈥� onto local filling stations, those stations then pass it all onto motorists.
According to the 海角换妻 Energy Marketers Association, the average wholesale price last week at New Haven harbor, the single-largest fuel importing site in the state, was $2.56 per gallon.
Based on that price, consumers currently pay 47.6 cents per gallon in state taxes alone: a 25-cent retail tax and 22.6 cents to cover the wholesale levy.
Gasoline prices continue to rise
And prices have been rising for a while now.
Wholesale prices are on pace to finish 2021 at an average greater than $2 per gallon, a benchmark last topped in 2014, according to the .
the average retail price of regular gasoline here as $3.55 per gallon on Tuesday. That鈥檚 16 cents higher than it was one month ago and $1.42 above the average price of one year ago.
State fiscal analysts recently for the current fiscal year by $13 million. That鈥檚 about 7% better than last year but still 10% below pre-pandemic levels.
Chris Herb, executive director of the Energy Marketers Association, said fuel distributors already are seeing demand return to pre-COVID levels.
And unless OPEC reverses its decision not to increase production, wholesale gasoline prices 鈥� and state fuel tax revenues 鈥� likely will keep rising for at least another year.
鈥淚 think in 2022 gasoline prices will still be the story,鈥� he said.
Melissa McCaw, Lamont鈥檚 budget director, said that 鈥渁t this time, the global oil market is especially erratic鈥� and analysts will reassess fuel revenues twice more before the fiscal year ends next June.
TCI has pros and cons for poor cities
If 海角换妻鈥檚 participation in TCI were to add 5 to 9 cents per gallon to the price of gasoline, that鈥檚 roughly 50 to 90 cents per car, per week. A household with two cars might face nearly an extra $100 in annual expenses.
But to those who call that negligible, advocates for low-income people would point to the state income tax鈥檚 Earned Income Tax Credit. Though it鈥檚 touted as a program to help working poor families save funds, advocates say most recipients actually must spend every penny they get 鈥� usually on groceries, utility bills, or diapers and other supplies for young children.
38% of all households in the state earn too little to meet basic survival needs.
New Haven鈥檚 Board of Alders echoed those concerns earlier this month when it unanimously enacted a resolution endorsing TCI 鈥� provided the program is not punitive to low-income households.
Board member Eli Sabin, who proposed the resolution, said improving air quality is a huge priority, especially in New Haven, where residents make about 1,600 asthma-related hospital visits annually.
But New Haven is home to more disparities than just those involving health care caseloads.
鈥淔or a long time, 海角换妻 has had a sort of upside-down tax system,鈥� he said. 鈥淲e wanted to make sure that the legislature and governor understood that all of that important [climate change] work can鈥檛 come at the cost of making energy unaffordable for the poor.鈥�
Looney said that if the TCI is to move forward, the administration must be ready to discuss helping needy households cover that cost. This could involve redistributing some tax burdens in the state.
Lamont blocked progressive Democrats鈥� efforts this past spring to increase taxes on 海角换妻鈥檚 wealthiest households and major corporations. The governor, a Greenwich businessman, has argued repeatedly that boosting state taxes on the wealthy would prompt them to flee 海角换妻 and that any major tax hikes would weaken the economic recovery from the pandemic-induced recession.
And while expanding tax breaks for low- and moderate-income households likely wouldn鈥檛 require tax hikes on the wealthy as large as those considered last spring, it could require some more revenue from 海角换妻鈥檚 wealthiest taxpayers to keep the state鈥檚 budget in balance.
Lori Brown, executive director of the 海角换妻 League of Conservation Voters, said it would be unfortunate if state leaders don鈥檛 reach some agreement to join TCI, because the cities would be the biggest losers.
Urban centers offer some of the worst air quality and highest asthma rates in the state.
TCI not only would seek to improve on that situation by curbing greenhouse gas emissions, but some of the revenue raised through this program would be used to expand bus and other state transit services, which are in great demand, Brown said.
The Lamont administration estimates TCI would generate about $80 million annually for the state鈥檚 transportation program. This would provide sorely needed matching funds to help 海角换妻 qualify for the maximum amount of federal assistance possible under the new infrastructure bill recently enacted by Congress.
Many of the state Department of Transportation鈥檚 highest-priority highway projects are in or near 海角换妻鈥檚 largest cities.
TCI advocates hope for a special session vote in December
鈥淭here鈥檚 a ton of money we can end up leaving on the table鈥� by not joining TCI, Brown said, adding that environmental advocates still hope lawmakers would consider approving the transportation initiative in special session before the calendar year鈥檚 end.
Another environmental group, Save the Sound, called Lamont鈥檚 comments on Tuesday 鈥渋ncredibly disappointing.鈥�
鈥淲e know that oil prices are incredibly volatile,鈥� the group wrote in a statement. 鈥淭hat is one of the strongest reasons to implement TCI and provide transportation alternatives that won鈥檛 subject 海角换妻鈥檚 citizens to the whims of distant oil markets. We can鈥檛 base long-term decisions about our climate commitments, transportation infrastructure, and 海角换妻 residents鈥� health on the conditions of this moment鈥攚e need to look at trends and needs over time and plan for decades to come.鈥�
Max Reiss, Lamont鈥檚 communications director, said that if the legislature were ready to address environmental issues, the governor would be ready to act.
鈥淭he governor still wants to de-incentivize gas-guzzling cars off the road and reduce consumption of fossil fuels,鈥� Reiss said. 鈥淭hose things haven鈥檛 changed.鈥�
Reiss added that Lamont continues to be responsive to families feeling the pain of inflation and the coronavirus.
The new budget the governor signed pumps hundreds of millions of dollars in new state aid into municipalities. And Lamont recently reopened the idea of expanding the property tax credit within the state income tax to relieve burdens on low- and moderate-income households.
Lamont pledged during his 2018 campaign for governor to expand the property tax credit but has not fulfilled that pledge during his first three years in office.
Lamont would need to reach common ground with Democratic legislators, who hold majorities in the House and Senate, to have any hope of winning passage for TCI because the proposal has drawn strong opposition from Republicans, who argue environmental goals can be achieved without raising more revenue from motorists.
鈥淭his administration and the [Democratic] majority have a track record of just foisting taxes on 海角换妻 residents,鈥� Senate Minority Leader Kevin Kelly said, citing a new highway usage tax on large commercial trucks and passed by the legislature this past spring.
That transportation program already will reap $90 million annually from that truck tax, which Republicans opposed, arguing it would drive up the cost of many commercial goods.
A TCI-related increase in fuel taxes would only exacerbate the problem, Kelly said.
State Capitol Bureau Chief Mark Pazniokas contributed to this article.