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The Honolulu Advertiser
Posted on: Wednesday, December 20, 2006

Gas tax rising 11

StoryChat: Comment on this story

By Sean Hao
Advertiser Staff Writer

Ed Campbell filled up at the Kahala Shell service station recently. He gave this opinion of the price of regular gas in Honolulu rising about 11 cents per gallon on Jan. 1 as a state tax break expires: "That's beautiful. It's just like taxes on property they just keep going up."

BRUCE ASATO | The Honolulu Advertiser

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The price of regular gas in Honolulu will rise about 11 cents per gallon on Jan. 1 as a state tax break expires.

An exemption from the general excise tax for gasoline blended with ethanol ends on Dec. 31.

"It's going to be an instant 11-cents-a-gallon impact" on prices, said Bill Green, a former owner of, and now consultant to, Kahala Shell.

"At that amount, it has to be passed along" to consumers, he said. "There's really no choice."

The tax break for ethanol-blended gasoline was created in 1980 to spur the use of alternative fuels. However, it didn't kick in until April, when the state started mandating that most gasoline in Hawai'i contain ethanol.

The addition of the excise tax will make Hawai'i's gasoline taxes the highest in the nation.

Hawai'i consumers currently pay 50.2 cents a gallon in federal, state and county taxes, which was the 10th highest in the nation in October, according to a survey by the American Petroleum Institute. Tacking on the higher general excise tax which rises from a maximum of 4.166 percent to 4.712 in January on O'ahu to help pay for a transit system lifts the total tax on gasoline sold in Honolulu to 61.5 cents a gallon.

That would be the highest tax in the nation and 16 cents higher than the national average tax of 45.5 cents a gallon..

"The net result for consumers will be an increase" in prices on Jan. 1, said Tesoro Corp. spokesman Nathan Hokama. "But the increase is really a result of taxes and not the price of gasoline itself."

TAX CUT BARELY FELT

The tax cut in April was barely noticeable because it took effect when gasoline prices were steadily rising. However, it's unlikely an 11-cent-per-gallon jump will go unnoticed.

"That much?" asked retiree Ed Campbell, as he filled a gold-colored Acura with 12.8 gallons of premium gasoline. "That's beautiful," Campbell added sarcastically. "It's just like taxes on property they just keep going up."

Campbell's tankful would have cost about $1.50 more if it were subject to the excise tax.

The 11-cent tax increase will be on top of what are already the highest gasoline prices in the nation. The statewide average for regular was $2.83 a gallon yesterday. That's the most expensive in the country and 52 cents higher than the national average of nearly $2.31, according to the AAA Daily Fuel Gauge Report.

GOVERNMENTS' TAKE

The state's high gasoline prices can be traced to numerous causes that are largely out of the hands of local lawmakers, including Hawai'i's small market size, geographic isolation and lack of Mainland-type competition. However, taxes are another story.

In breaking down the taxes, the most 18.4 cents a gallon goes to the federal government while 16 cents goes to the state. County taxes vary, and are 16.5 cents on O'ahu. Another 0.1- cent-a-gallon tax for environmental response programs goes to pay for cleaning up oil spills, drinking water contamination and underground storage tank leakage.

On top of it all, a total of 4.712 percent in retail and wholesale general excise taxes will be applied to gasoline sales starting Jan. 1. That equates to an added 10.5 cents on a gallon of regular gasoline purchased at today's prices.

Apart from general excise taxes, which go into the general fund, the state and county taxes go toward road construction and repair, and in Honolulu they are also used to subsidize the city bus system.

Excluding general excise taxes, the state collected $116 million in state and local fuel taxes in the fiscal year ended June 30. About $81 million of that money went into the state's highway special fund, which is mainly used for road building and maintenance and to match federal construction money. State fuel tax dollars accounted for about 41 percent of the fund's total revenues of $204 million last fiscal year, according to the state Department of Transportation.

TAX TIED TO PRICE

Federal, state and county fuel taxes are calculated on a per-gallon basis, but the general excise tax is a percentage of the total price. What Hawai'i drivers will pay will vary depending on the price of gasoline.

The tax increase may be more palatable because gasoline prices have fallen sharply in recent months, from about $3.25 a gallon for regular in Honolulu to an average of about $2.75 yesterday.

"I think we're getting used to paying the high prices," said Wai-'alae resident Calvin Tamaye as he filled an Acura recently.

At least one driver though probably in the minority welcomes the jump in taxes.

"I'm in favor of higher taxes on gasoline and other carbon-containing fuels," said Wai'alae resident Erik Kvam as he vacuumed a Geo at Kahala Shell recently. "We need incentives for people to develop alternative forms of energy."

Reach Sean Hao at shao@honoluluadvertiser.com.

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