On Gas and Gasbags

According to some reports, gas prices are due to increase as much as 60 cents on the gallon by summer.

Citing rising gas prices, up 83 percent under his tenure, President Barack Obama has called for an extension of the payroll tax cut as a means of providing some relief to a Middle Class hard hit by the malingering Obama recession.

“Allowing this tax cut to expire,” Mr. Obama said, “would make people’s lives harder right now. It would make their choices more difficult. It would be $40 less for groceries to feed your kids; it would be $40 less for the medications you depend on; $40 less to cover bills and the rent; $40 less to take care of an elder parent, or to donate to a church or a charity.”

CNSNews points out, “When Obama entered the White House in January 2009, the city average price for one gallon of regular unleaded gasoline was $1.79, according to the Bureau of Labor Statistics. The figures are in nominal dollars: not adjusted for inflation. Five months later in June, unleaded gasoline was $2.26 per gallon, an increase of 26 percent. By December 2011, the price of regular unleaded gas per gallon was $3.28, an 83 percent increase from January 2009.”

Prices on commodities generally rise for two reasons. Either a shortage of the product or an increase in demand will make gas more expensive; therefore, it follows that an increase in the supply of the product will lower the price of gas. Mr. Obama’s government does not wish to pursue an energy policy that will reduce the price of gas by increasing the supply of the product – easily done by tapping into plentiful supplies both in the United States and Canada -- because the administration wishes to encourage the production of cars that do not use gas. Also, the federal government winks at high gas prices because federal and state revenues rise in direct proportion to increases in the price of gas.

Here in Connecticut, which has the second highest gas tax in the nation, Republican State Senator Len Suzio has crafted a bill that will cap the notorious 7.35 percent Gross Receipts Tax at three dollars a gallon. Without the cap, the hidden gross receipts tax rises in tandem with the rise in the price of gas. The state of Connecticut reaps about 50 cents per gallon of gas from Connecticut’s excise and gross receipt taxes. About 23 cents per gallon is sucked out of taxpayer’s wallets and purses by the aptly named GROSS Receipts Tax. Mr. Suzio’s proposed cap will, of course, mean less tax revenue for the state’s incontinent Big Spenders in the General Assembly, the majority of them Democrats who have not taken a shine to Mr. Suzio’s version of Mr. Obama’s Middle Class tax relief bill.

Democratic Senator Paul Doyle of Wethersfield, for instance, cautioned that “people should not be fooled into thinking the plan will translate to relief at the gas pump… Not only does this proposal fail to rein in out-of-control gas prices, but it would dramatically reduce revenue needed to repair bridges and roads throughout the state, projects that would in turn create jobs. While I appreciate the zeal for tax cuts in general, I find unacceptable any tax cut that does not get passed to consumers at the pump and that could jeopardize the safety of drivers on state roads and bridges… As co-chairman of the committee that fights to protect consumers, I do not believe the proposal would ease the burden of exorbitant gas prices,” said Senator Doyle, who chairs the General Law Committee.

According to news reports, Mr. Doyle promised – tardily, as it happens – “to work with the Department of Consumer Protection and other consumer advocates to explore ways to ensure gasoline wholesalers adhere to Connecticut law and do not pass the cost of the gross receipt tax onto consumers.”

The issue was decided 30 years ago in Mobil Oil Corp versus Dubno. The state of Connecticut sought to prevent oil companies from passing along to consumers the gross receipts tax it imposed on oil. The Supreme Court, rendering a declaratory judgment, found unconstitutional the prohibitive portion of the Connecticut statute -- section 13(b) of Connecticut Public Act 80-71 – because “…it is pre-empted by federal law and thus violates the Supremacy Clause [of the U.S. Constitution].”

Mr. Suzio points out that Mr. Doyle, the co-chairman of the Law Committee, likely does not have “power to overturn Supreme Court decisions.”

Mr. Suzio’s tax cut, no less than the tax cut for which Mr. Obama is agitating, will make it easier for the Middle Class to survive the crushing tax increases imposed upon them by Mr. Malloy, the architect of the largest tax increase in Connecticut’s history, even at the risk of disappointing tax prone Democrats such as Mr. Doyle.