Gas tax will pump up the price

Motorists in Hawaii will be forced to fork over about 11 cents per gallon more when fueling

When the clock strikes midnight, the passage of 2006 will also mean the expiration of a tax exemption on virtually all gasoline sold in Hawaii.

Under current prices, the reinstatement of the tax could add about 11 cents to a gallon of gas, and some retailers already have said they will have no choice but to pass that increase on to consumers.

Whether the tax remains in place will be decided in the coming months, as political wrangling over gas prices continues in the Legislature.

Gov. Linda Lingle on Friday called on the Legislature to extend the exemption -- an idea that appears to have support from some Democratic leaders.

"I think there will be bills introduced this session to extend that," said incoming House Majority Leader Kirk Caldwell (D, Manoa).

Senate leaders, including incoming Transportation Chairman J. Kalani English (D, East Maui, Lanai, Molokai), also have said they would be willing to look at proposals to extend the exemption. English chaired the Senate Energy Committee last session.

Lingle criticized the majority for not passing a proposal introduced last year by her administration that would have extended the exemption until the end of 2009.

"Had the Legislature approved our proposal to extend the general excise tax exemption, Hawaii consumers would have an additional three years of reduced costs for ethanol-blended fuels, rather than having to pay more at the pump starting Jan. 1," Lingle said in a statement.

Caldwell noted that Democrats also submitted proposals looking to extend the exemption.

"Unfortunately, they fell through the cracks when they really shouldn't have," Caldwell said, adding that most of the attention last year was on the now-suspended wholesale price caps.

The high cost of gasoline in Hawaii has been a long-standing issue with lawmakers, culminating over the last few years with the passage, enactment and ultimate repeal of the nation's only attempt to control gas prices.

With the failed attempt at price caps behind them, lawmakers are now left to consider other ways of addressing the cost of gas, and taxes are just one area to consider.

Although the excise tax exemption actually was passed in 1980 to encourage the development of alternative fuels, it took effect only in April, when separate regulations went into effect requiring that 85 percent of all gasoline sold in Hawaii be blended with at least 10 percent ethanol.

It expires just as taxpayers on Oahu prepare for a half-percentage point increase in the GET to pay for a mass transit system and less than two weeks after news that property tax valuations across the island were up 15 percent from a year ago.

A reinstatement of the general excise tax equating to 11 cents would give Hawaii the dubious title of having the steepest gas taxes in the country -- about 61.5 cents per gallon. As of October, the national average was about 45.5 cents a gallon and New York had the highest rate of 60.1 cents a gallon, according to the American Petroleum Institute.

Even without the tax, Hawaii also had the highest gas prices in the country during the same period.

The statewide average on Friday was $2.83 a gallon, 13 cents above the next highest state, Oregon, and well above the national average of $2.33, according to AAA's Fuel Gauge Report. Hawaii's prices also have declined at a slower rate than the mainland average.

"I do question whether the savings was passed on to the consumers," said Caldwell. "If we extend it (the exemption), does that mean gas prices will drop by 11 cents?"

Melissa Pavlicek, a spokeswoman with the Western States Petroleum Association, an oil industry lobbying group, says there are too many factors that go into gasoline pricing to pinpoint a specific item that could single-handedly affect costs.

"It's one of those things where it's impossible to attribute it to any one given factor because there's so many factors going on at the same time," she said.

In addition to an examination of gas taxes, Caldwell said he also expects to revisit the issue of transparency to serve as a check on pricing practices.

Along with a suspension of the price caps, lawmakers last session passed regulations aimed at making more pricing data public.

"I think the people of this state are owed an explanation as to why the price of gas is as high as it is," said Caldwell. "She (Lingle) repealed the gas cap and has taken no action since."

Lingle's administration has supported the transparency requirements, but has criticized the Legislature for appropriating only $1 to the Public Utilities Commission to carry out the mandate.

While Caldwell said he believes some data collection could have been accomplished with existing resources, he expects lawmakers to look at getting the PUC what it needs in 2007.

"You get the transparency, you gather the information and you hire the people who can analyze the information," Caldwell said. "Then you report back to the people of the state as to what is really occurring.

"We owe it to the people of this state and I think the executive branch owes it to the people to do that."

The 2007 legislative session begins Jan. 17.

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