Legislature Halts Gas Tax Hike, Conveyance Tax Reduction

HARTFORD (AP) — Working through the wee hours Thursday morning, members of the state legislature closed a special session after addressing several key initiatives while shelving a handful of other concerns that Republican minority members attempted to introduce.

Well aware of motorists’ discontent over skyrocketing gasoline prices, state lawmakers voted early Thursday to stop a planned increase in a state gas tax that would have added up to five cents to the price of a gallon of gas.

Proponents acknowledged the savings was small, but said they wanted to send their constituents a message that they care about the rising gas price problem in Connecticut, where the average price for a gallon of unleaded gas was $4.35 on Wednesday.

“This is something that we can do to provide a service, to let our citizens know that we are very concerned about what they’re up against,” said Senator Eileen Daily, D-Westbrook, co-chairman of the tax-writing committee.

Lawmakers had originally planned the one-day special session to extend a local real estate transaction tax for two more years. But the General Assembly has come under pressure to somehow combat rising fuel prices.

The tax on wholesale earnings from gasoline sales was supposed to increase from 7 percent to 7.5 percent, raising an estimated $25 million in revenue for the state. Republicans, the minority party in the legislature, failed in their attempts to cap the rate, which is scheduled to go up to 8.1 percent in five years.

Without the cap, they said Thursday morning’s action was minuscule.

Besides the gross receipts tax on petroleum products, the state also imposes a flat, 25-cent-per-gallon tax on gas. That will not change.

Other parts of the bill would make it easier for gas stations to offer discounts to people who pay for their gas with cash, set aside $2.5 million to help buy fuel-efficient furnaces for 3,000 low-income and elderly households, and provide stronger protections for consumers who enter into prepaid heating oil contracts.

Much of Wednesday’s one-day session, which spilled into early Thursday morning, was consumed by political battles over legislative rules. The House finally wrapped up the session shortly after 3 am.

Democrats, who control the General Assembly, fought off numerous Republican attempts to expand that agenda to include other items, such as increased funding for nursing homes and nonprofit social service agencies. The GOP is miffed that Governor M. Jodi Rell, a fellow Republican, and the Democrats adjourned the regular session without making changes to the budget that takes effect on July 1.

Majority Democrats said there just is not enough money to do what the GOP wants.

“While these are wonderful things to run on, the reality is we cannot do them,” said Senator Toni Harp, D-New Haven.

The new fiscal year that takes effect on July 1 is about $150 million in deficit.

Meanwhile, lawmakers agreed to extend a local tax on real estate transactions for two more years — a move strongly opposed by real estate agents, but touted by municipal officials who argue they desperately need the revenue.

The tax, paid by the home seller, is expected to raise $36 million to $38 million from the slowing real estate market.

“In our world, revenues are very difficult to obtain,” said New Britain Mayor Timothy Stewart, whose city is expecting about $400,000 from the tax. New Britain is facing a budget deficit of about $2.2 million, he said.

But real estate agents claim it is unfair to impose the tax, which was supposed to be temporary, on sellers in such a poor market. The Connecticut Conference of Municipalities estimates the tax would add $420 to the sale of a $300,000 home.

“If you don’t kill it now, it’s here to stay,” warned Senator David Cappiello, R-Danbury. “Please keep the promise you made five years ago.”

House Republicans tried to amend the bill to exempt everyone from senior citizens to people who owe more on their homes than what the property is worth. Each attempt failed.

Newtown First Selectman Joe Borst said he has told local real estate agents he is ambivalent about the conveyance tax.

“I told realtors earlier this year that it’s a hidden tax. From what I’ve read, it doesn’t really influence the sale of houses,” Mr Borst said. “And we’re talking about $350,000 annually coming to the town.”

While Mr Borst said the net benefit to the general fund from conveyance taxes was estimated, town Finance Director Robert Tait said the $350,000 windfall was “in the ballpark.”

In other special session action, lawmakers passed a long-awaited bill that allows the revocation of government pensions of state and local officials and employees convicted of corruption. Also, they passed a bill that covers cost overruns in several state agencies, including $21.9 million for the University of Connecticut Health Center.

All the bills await the governor’s signature.

(Newtown Bee Associate Editor John Voket contributed to this story.)