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The New York State Senate approved a temporary gas-tax-relief bill, which would eliminate approximately 32 cents in state taxes from gas-pump prices this summer, by a margin of 46 to 15 yesterday.

If passed by the State Assembly and approved by the governor, the tax break will go into effect on Memorial Day weekend and run through Labor Day.

“It’s a strong gesture that shows we’re aware of the problems of working class people,” State Sen. Serphin R. Maltese (R-Glendale), a co-sponsor of the bill, said. “It’s our obligation to our hard-working tax-paying constituents.”
The bill will temporarily suspend state petroleum taxes, including16 cents from the state’s Petroleum Business Tax, eight cents from the state sales tax and eight cents from the state’s Motor Fuel Excise Tax.

Despite criticism over gas-tax breaks at the federal level, where politics, law and national policy mingle – local initiatives have been received more positively. While federal tax proposals are seen as shortsighted for not addressing the larger issues of oil dependency and global warming, state proposals are viewed more favorably as short term fixes to local problems – buying time for the federal government to get its act together on a sustainable energy policy.

“The bottom line is that it’s a good idea,” Anthony Sabino, an associate professor of business law at St. John’s University, said. “This affects everybody – prices are going up at the pumps and at the stores.”

Sabino believes that the tax reduction will impact prices across the board – from the gas station to the grocery store, where fuel prices can leak into food prices during shipping.

“It will stop the momentum of prices going up – it will stop the escalation and let people catch their breath,” Sabino said.

But many still have their reservations on how much of the tax break will be in the hands of New Yorkers, including the governor.

“It is a meritorious proposal, if in fact that savings is passed onto the consumer,” Gov. David A. Patterson said during a press conference last Wednesday. “They have this leap of faith between our imposition of the diminished tax and whether or not the consumer will collect it. I don’t hear pledges from the retail industry. I don’t hear anyone saying that they aren’t going to take what would be the windfall and keep it for themselves.”

In fact, a study by the American Road and Transportation Builders Association seemed to confirm the governor’s fears. The study found that retailers in states with similar proposals did not pass all of the savings to consumers. The study, based on Indiana and Illinois gas-tax suspensions in 2000, found that consumers only received four cents of the approximately seven cent cut in both states, resulting in a nearly $40 million revenue loss that year for Indiana and an estimated loss of $300 million per year in Illinois.

In a year with tight budget limitations, New York lawmakers are banking that consumers will drive and spend more to make up for tax revenue losses, which fund the maintenance of state roadways. But with no way to enforce the gas savings, the fate of the budget may end up in the hands of cash strapped consumers forcing market rates down.

“A lot will be voluntary compliance,” Sabino said. “It’s up to us as consumers to carefully look at the pump.”
Despite the potential risks, it’s hard for any politician to ignore pleas for help in a hostile market.

“I think to wring our hands and do nothing is not acceptable,” Maltese said. “It’s a step in the right direction.”