Should RI Cut 5-Cents Off Gas Tax?

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In his quest to revitalize the East Bay, Sen. Walter S. Felag Jr. (D-Dist. 10, Warren, Bristol and Tiverton) has proposed a 5-cent per gallon cut in the state gas tax in hopes that local businesses stop losing customers to Massachusetts.

A 5-cent per gallon cut in Rhode Island’s gas tax will impact the state’s tax revenues, but with the gas tax in Massachusetts a full 10 cents a gallon lower than in Rhode Island, Felag is more concerned about local stations losing business to stations just across the border.

“If our gas tax continues to be so high, and so much higher than taxes in Massachusetts, our state should be concerned about how much revenue will be lost if Rhode Island stations close because they cannot compete fairly,” said Senator Felag. “You can’t get blood out of a stone and you can’t get tax revenue out of gas stations that are closed because motorists are driving a few miles into the Bay State to save money.”

Senator Felag has introduced legislation, 2013-S 0085, that would reduce the Rhode Island gasoline tax by 5 cents, from the current 32 cents per gallon to 27 cents per gallon.

Coupled with the federal gas tax, purchasers of gasoline in Rhode Island are paying 51.4 cents per gallon in tax, compared to 41.9 cents in Massachusetts.

“In our efforts to make it better to do business in Rhode Island, we cannot concentrate only on major companies, or start-ups, or certain private sectors. We must do what we can to help the small businesses in our state, and that includes operators of gas stations which, if located near the Massachusetts border, are daily losing business to our neighboring state,” said Senator Felag.

“Admittedly, with some of the tax moves Massachusetts has made in recent years and others the state is talking about, we need to do a major examination of our tax structure to make all businesses in Rhode Island more competitive,” he said. “We can start, though, with this one small area.”

Senator Felag said he is aware that a cut in the gas tax will mean less revenue intake for the state, but he said that “if our businesses are competing on a level playing field, I believe they will do more business and that means more revenue. On the other hand, if these stations go out of business, that will mean a lot of tax revenue that is lost.”

The bill has been referred to the Senate Committee on Finance.

Do you think a cut in gas tax could help the Rhode Island economy?  Or can we not afford the loss in revenue?  Tell us in the comments below.