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Gas Taxes May Be Ripe For Ax

With a gallon of gas breaking $3 and voters unhappy, elected officials in a number of states are taking a sudden, sharp dislike to gasoline taxes, proposing to eliminate the levies that are a mainstay for road programs - or at least suspend them for the summer.

Governors have floated ideas to trim or suspend state gas taxes in Maryland, South Carolina and Connecticut. State legislators are pushing similar measures in Georgia, New York and Nevada. The proposals are winning vocal support from Republicans and Democrats alike, though none have yet become law.

"We think it would have real bottom-line benefit to a lot of working families who are struggling with the price of gas," South Carolina Gov. Mark Sanford said on Wednesday, when he proposed suspending the state's 16.8 cent-per-gallon tax for three months.

Critics say the proposal is a mistake, questioning whether drivers would actually see the tax cut, the potential to undermine necessary road and transportation programs and the larger environmental impact.

Still, with elections later this year, the popularity of the idea was made clear in South Carolina when the Republican governor - who's been unable to win support for a number of other proposed tax cuts - quickly won bipartisan support for his proposal.

"I feel like I'm the evangelist who's been singing at the country tent. Welcome to the tent," Sanford said after a news conference that grew so jammed it had to be moved from his office into the statehouse lobby outside. "There's a lot of energy around this issue."

In other states:

  • New York lawmakers agreed Wednesday to cap the sales tax at 8 cents per gallon, freezing the tax at the rate paid when gas costs $2 a gallon. Lawmakers said that would save consumers $450 million a year.
  • North Carolina Gov. Mike Easley, a Democrat, wants to cap the gas tax and said he'll include a proposal in his budget proposal this week.
  • Connecticut Gov. Jodi Rell, a Republican, threatened to call a special session on energy issues and said she is open to a legislative proposal to suspend the state's 25 cent-per-gallon tax for the summer.
  • Georgia Democrats are demanding GOP Gov. Sonny Perdue suspend the gas tax, as he did after the spike in prices that followed Hurricane Katrina.

    Other states where the idea has been raised include Texas, Minnesota, Delaware and Idaho.

  • The gas tax is the most widespread target as constituent anger grows over gas prices, but it's not the only measure being considered.

    California zeroed in on oil companies when a key legislative committee approved a windfall profits tax aimed at oil producers. Several state attorneys general have begun investigations into price-gouging, and governors in California and Maryland have asked state officials to examine potential gouging.

    "We actually established a hot line and asked consumers to call," said Kentucky Attorney General Greg Stumbo, a Democrat who has sent out 43 subpoenas to petroleum companies, wholesalers and retail gasoline. "As the price fluctuates rapidly, as it increases rapidly we get more calls" - more than 600 so far, he said.

    But as prices in many parts of the country top $3 for a gallon of gas, states are looking hard at the one part of that cost they can control - the state tax.

    On average, states add 28.1 cents to each gallon of gas from a combination of excise taxes, business taxes and state and local sales taxes. It varies from a low of 8 cents in Alaska to a high of 49.5 cents in New York, according to the American Petroleum Institute.

    The federal government adds 18.4 cents to each gallon.

    "It's very easy to point the finger of blame at the oil companies," said Pete Sepp at the National Taxpayers Union, which supports the cuts. "But government is making a killing on these high prices, too."

    In South Carolina, Sanford estimates a three-month tax suspension would save a family $63. It would cost the state $134 million.

    But consumers might have a hard time noticing any savings at the pump, especially if prices keep rising, experts said.

    That's because retailers pay the tax when they buy gas from their distributor, and prices, as everyone has seen, can change quickly, said Rayola Dougher, manager of energy market issues for the American Petroleum Institute. So a spike in oil prices could easily swallow up a break from the state. Besides, prices often vary a few cents from station to station.

    A small tax cut like the one being considered in New York, which would be at least 4 cents, would be hard to see in day-to-day price shifts. A bigger cut like South Carolina's 16.8 cents would be easier to notice, depending on the price of crude, Dougher said.

    "The prices have been changing a lot harder and faster than 4 cents these days," Dougher said. "If you get up to 15, 20, 30 cents, sure, you're going to see it. But it's going to be hard to see four for all the noise."

    Others argue it's a misguided step for bigger reasons like the nation's dependency on oil or the impact of fossil fuels on the environment.

    "Cutting the gas tax is a false solution. I don't think the public is fooled," said Rob Sargent, energy analyst with the environmental coalition called the State PIRGs. "It just delays the inevitable - dealing with the bigger problem - and that is our overreliance on oil."

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