Starting July 1, trucks and other diesel fuel vehicles will face a 3.2-cent tax increase per gallon, as announced in a letter from the Connecticut Department of Revenue Services (DRS) to lawmakers. This hike raises the tax from 49.2 cents to 52.4 cents per gallon.
The increase comes after the General Assembly froze the diesel tax last year, which was set to rise by 12 cents in July. This decision aimed to provide relief to the trucking industry and, in turn, consumers, as diesel prices impact the cost of virtually every item purchased.
In 2022, the tax saw a significant increase of 9.1 cents.
The tax is determined by combining a 29-cent flat rate with a variable rate. This variable rate — implemented in 2007 — was calculated by multiplying the previous year’s average wholesale diesel price, $2.894, by the current petroleum products gross earnings rate of 8.1%.
Revenue from the tax is deposited into the Special Transportation Fund (STF) — a fund separate from the General Fund, dedicated to transportation purposes. This includes operating costs and employee retirement benefits for the departments of Transportation and Motor Vehicles.
Currently, the STF is projected to end the fiscal year with a $282.8 million surplus, according to an update from the Office of the State Comptroller (OSC) on June 3. This figure is $2.2 million higher than the previous month’s projection and $78.6 million more than budgeted. The OSC forecasts that the STF will have a positive balance of $961.9 million at the fiscal year-end.
“It’s concerning,” said John Blair, president of the Motor Transport Association of Connecticut in a statement about the increase to Yankee Institute (YI). “Any increase in costs [for the trucking industry], which have been rising year after year, is passed on to consumers. The additional costs of things you get from a commercial business are ultimately borne by the consumers who use the products.”
In addition to the diesel tax, the trucking industry faced another financial burden when the Highway Use Tax (HUT) was imposed on January 1, 2023. This fee applies to all Class 8 through 13 commercial vehicles. According to the latest Fiscal Accountability Report from the nonpartisan Office of Fiscal Analysis (OFA), the state is estimated to collect $65 million from this tax in fiscal year 2024.
The tax is calculated based on the vehicle’s gross weight and number of miles driven in the state. The gross weight includes cargo and freight. Costs range from 2.5 cents per mile for vehicles weighing 26,000 to 28,000 pounds to 17.5 cents per mile for trucks weighing more than 80,000 pounds.
Rep. Holly Cheeseman (R-East Lyme), ranking member of the Finance, Revenue and Bonding Committee — which has jurisdiction over all matters relating to fees and taxation — told YI that “Anything that adds to the cost of transporting goods and doing business will inevitably be passed on to the consumer, whether it is the diesel tax or the highway use tax.”
Cheeseman added, “Inflation is still running above the Federal Reserve’s goal and our residents are paying the price, literally. This tax increase won’t help.”
With concerns over rising prices on everyday groceries, Connecticut State Attorney General (AG) William Tong announced in April that his office is investigating potential price gouging at grocery stores after the Federal Trade Commission released a report that found rising food prices may not be “moving in lockstep with retailer’s own rising costs.”
The AG sent letters to grocery retailers statewide, requesting detailed information on their costs and revenue to determine if price gouging is in fact occurring.
While the Attorney General’s inquiry is commendable, it is crucial to also examine the broader context contributing to rising prices at grocery stores. The state’s costly regulatory environment, including policies like the diesel tax and HUT, plays a significant role in escalating costs. Addressing these underlying issues is essential to providing real relief for Connecticut’s consumers and ensuring a more stable economic future.
