New York Approves Drop in Gas Sales Tax

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New York Approves Drop in Gas Sales Tax

ALBANY -- The New York State Legislature passed a decrease in state sales taxes on gasoline on Monday, though some skeptical lawmakers questioned whether consumers will ever see a corresponding price break -- slight as it might be -- at the pump.

According to the Buffalo (N.Y.) News, the legislation, approved overwhelmingly by the Senate and Assembly, calls for capping the state sales tax at a maximum of 8 cents per gallon. That means motorists paying $3 per gallon today would save 4 cents a gallon.

But because gasoline taxes are not collected directly at the pump, industry officials say those savings likely will be swallowed up by oil companies or petroleum distributors before the gasoline even reaches motorists.

Gov. George E. Pataki on Monday added his voice to critics who worry a windfall could be created for the oil industry if the tax cuts are not passed on to consumers.

"Four cents a gallon is beyond a joke; the reality is it does so little it hardly matters," Assemblyman Joel Miller, a Dutchess County Republican, told his Assembly colleagues during floor debate.

The tax cut will reduce the state tax on gasoline by about $150 million if current gasoline prices continue.

For drivers, the individual savings will be more modest: On a 20-gallon fill-up at $3 a gallon, the legislation will save 80 cents. But that is only if the tax cuts are passed on to consumers, which -- given how gas taxes are collected and the volatile nature of petroleum pricing -- will be impossible for consumers to tell, industry officials said.

Lawmakers, though, say the measure has teeth in it to force the savings to go to consumers. It directs the state Tax Department to monitor the industry to ensure the tax savings are not eaten up by petroleum companies before reaching the pump; it carries penalties of $5,000 for service stations that don't pass the tax breaks to consumers.

Gasoline station operators, though, say they don't collect the tax, which is paid by distributors before the petroleum even gets to the service stations.

But that did not stop legislators from hailing the bill as a major event for motorists, according to the newspaper report.

"It's the taxpayers of New York State who understand what we're doing today, and that is reducing their taxes," said Sen. James Wright, a Jefferson County Republican and chairman of the Senate Energy Committee.

Pataki has not yet said if he will sign the measure. Monday, he voiced concerns again that the Legislature did not address calls that he has made to give tax breaks to encourage greater use of alternative fuels. He also wondered how lawmakers envisioned paying for the tax break, since the state budget already was approved.

The legislation leaves it up to local governments to decide whether to also enact gasoline tax cuts. Erie County Executive Joel Giambra said the county cannot afford to cut the 4.75 percent sales tax on gasoline.

That is bad news to Carl Hasselback, who runs Jim's Truck Plaza in Cheektowaga. His chief competition for truckers rolling through the region is in Genesee County, and he fears Genesee officials will cut the county's local gasoline sales tax while Erie County keeps its current rate. If that happens, he said, his competition could underprice him by at least 7 cents a gallon. That, he said, would lead the big interstate trucking companies -- which monitor prices daily via the Internet -- to bypass his station for the average purchase of about 100 gallons per truck that comes to his station.

"I think it's bankruptcy for our business," Hasselback said if the bill is signed by Pataki and Erie keeps its current tax rate in place and Genesee County -- or some other county with truck stops along the Thruway -- drops its rate. "It's creating unlevel playing fields, and it's just a function of poor legislation."

Assemblyman James Hayes, R-Amherst, said the state should have dug deeper and joined the vast majority of other states that have no sales taxes on gasoline. "This is just a very small incremental step," he said.

Assemblyman John McEneny, an Albany Democrat, said the state could do far more to encourage a reduction in gasoline consumption that, in turn, could help lower prices. He cited pushing motorists to slow down on the highways to 55 mph and financial incentives for car-pooling.

"I'm not sure how much good it will do or for how long it will do much good," McEneny said of the state sales tax cut.