ALBANY, N.Y. -- Less than a week after Hawaii's Governor Linda Lingle signed legislation to suspend the state's flawed gasoline price cap law, New York lawmakers agreed to cap the state sales tax on gasoline, a move that would save consumers with a 20-gallon tank about 80 cents a fillup, said the Associated Press.
The bill, which would take effect June 1, caps the sales tax at 8 cents per gallon, freezing the tax at the rate paid when gasoline costs $2 a gallon. Lawmakers said that would save consumers $450 million a year.
The [image-nocss] agreement comes nearly eight months after the Republican-led state Senate first proposed a cap on the tax amid soaring gasoline prices following refinery shutdowns caused by Hurricane Katrina.
"Every day the increasing price of gas takes a bigger bite out of the wallets of families and businesses in New York when they fill up their tanks," State Senate Majority Leader Joseph Bruno (R) said. "I'm pleased that we were able to work out an agreement with the Assembly to deliver a result that will provide significant savings to motorists."
The bill gives local governments the option of capping or lowering their local sales tax on gasoline. Local governments typically charge 12 to 15 cents per gallon at current prices.
State Assemblyman Paul Tonko (D) said the bill will ensure that savings are passed along to consumers by gasoline retailers. Gas station owners who do not lower prices to coincide with the lower tax could face fines up to $5,000 per violation.
"The major benefit is that this maximizes the guaranteed savings coming to the pockets of consumers," said Tonko, chairman of the Assembly's Energy Committee. "Nothing would have been more vulgar than to have the potential savings become a new windfall for the profit-richest industry in the history of commerce."
Frank Mauro, a fiscal analyst for the union-backed Fiscal Policy Institute, said lowering the retail price of gasoline would only be a short-term fix for the problem of dependency on oil. "I think it might be appropriate in a democracy for government to respond to public outrage, the problem is, it could hurt in the long rather than help," he said.
Legislative leaders said both the Assembly and Senate would pass the bill next week. The bill, which still needs the approval of Governor George Pataki, also allows New York City to cut or eliminate its local sales tax on home heating oil and gives consumers tax credits for purchasing home heating oil that contains biodiesel fuel or for buying energy efficient home heating systems.
In Hawaii, gasoline refiners and distributors will no longer be bound by an artificial formula that sets wholesale gasoline prices in eight regions around the state. The cap had been in effect since Sept. 1, 2005. Since that time, global oil prices have risen sharply. As a result of the cap, Hawaii experienced unprecedented swings in the price of fuel from one week to the next, and the gap between mainland and Hawaii gasoline prices increased.
I am pleased that Hawaii consumers will no longer be subject to the failed experiment to artificially control gas prices, Lingle said. She cautioned that drivers should not expect to see the price of gasoline decline any time soon given the global demand for petroleum and limited supplies.
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