New York Caps Gas Tax

Has the New York Legislature finally come to its senses about taxation, at least when it comes to the gas tax?

With New York State's gasoline taxes the highest in the nation, legislative leaders agreed on Wednesday to cut 4 to 9 cents a gallon from the tax, even as the oil industry says there is no guarantee the savings will actually reach the public.

The agreement comes as lawmakers across the nation are brimming with proposals to offer relief at the pump, though a recent proposal by Republicans in Washington to offer drivers $100 rebate checks was abandoned after being ridiculed as a political ploy. The New York Legislature is expected to approve the bill next week and send it to Gov. George E. Pataki, whose aides are reviewing the legislation.

Federal, state and local taxes add an average of 67.9 cents to the price of a gallon of gas in New York State. New Jersey, by comparison, has taxes of just 32.9 cents a gallon. And gas taxes in New York have been rising alongside gas prices because state law requires that part of the taxes increase proportionally to the underlying price of gas.

But should the measure win final approval, even the oil industry acknowledges that there is no guarantee that the savings will get passed on to consumers.

One reason is that gas taxes, for the most part, are levied when oil companies import fuel into the state and not directly at the pump. Though tax cuts at the wholesale level are passed down to retailers, small cuts would not necessarily show up in prices set by gas stations since variations of a few cents among stations are common.

This should improve the bottom line of businesses that sell motor fuels, and might lower the price of gas at the pumps for consumers, but it is not a certainty. The only way that such prices would be lowered is if the actual rate is changed - not simply capped.