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Taxes on the Rise in Connecticut, Virginia

HARTFORD, Conn., and RICHMOND, Va. - To the disappointment of retailers in Connecticut and Virginia, the states have increased, respectively, their fuel and cigarette taxes.

The Connecticut General Assembly passed a transportation bill that includes provisions for raising the state's tax on gross earnings derived from the sale of petroleum products. The first increase took effect July 1 and will cost consumers roughly an extra penny per gallon, according to the Independent Connecticut Petroleum Association (ICPA), which represents the majority of Connecticut's motor fuels dealers.

Gene Guilford, director of ICPA, said, "Governor Rell's transportation package, which was passed by the Connecticut legislature, is a broad measure with many laudable provisions. However, the gasoline dealers of Connecticut are seriously opposed to funding the bill by raising the tax on gross earnings from the sale of gasoline and other petroleum products.

"This measure will result in raising the price of gasoline for Connecticut consumers at a time when gasoline price are already at near record highs due to world energy demand and energy price speculation on the NYMEX.”

Guilford pointed out that Connecticut consumers currently pay 25 cents per gallon state excise tax and 18.4 cents per gallon federal excise tax on gasoline, and 26 cents per gallon state excise tax and 24.4 cents per gallon federal excise tax on diesel fuel -- the third-highest excise taxes in the region.

In addition, he said, Connecticut motor fuel prices reflect the effect of the "hidden" state tax on gross earnings derived from the sale of petroleum products, currently at 5 percent. The new legislation raised the rate on that tax to 5.8 percent effective July 1 and continues to increase the tax rate to as high as 8.1 percent by July 1 of 2013.

"When a tax on gasoline goes up, so does the price of gasoline and diesel -- end of story,” he said. “The gross earnings tax is a tax on petroleum products."

In Virginia, the state's tax on cigarettes increased on July 1 from 20 cents a pack to 30 cents, the second part of a two-step increase that began last year, according to the Washington Post. As part of the state's 2004 tax and budget plan, lawmakers first increased the cigarette tax from 2.5 cents to 20 cents. That change took effect in September 2004.

The $98.5 million in additional revenue projected from the cigarette tax increase will be used for health care for children from low-income families, for the elderly and for the disabled.

In addition, several changes to the state criminal code are taking effect, including measures designed to curb underage drinking.

Under one law, possession or consumption of alcohol by anyone younger than 21 will carry a maximum penalty of a year in jail. Also, adults found guilty of purchasing or providing alcohol for someone younger than 21 -- except children or guests in their homes in some instances -- will face a maximum penalty of a year in jail and possible suspension of their driver's license.

"The two new laws address both supply and demand when it comes to underage drinking in Virginia," said Kurt Erickson, president of the Washington Regional Alcohol Program.

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