Bill would boost barrel tax nearly 3,000 percent

The state Senate Ways and Means Committee has agreed to raise the tax from 5 cents a barrel to $1.55 with most of the increase going to the general fund to help close a $1.2 billion budget deficit. The remainder would be divided among food security and alternative energy programs. According to the committee, the measure could raise an estimated $33 million a year, with $22 million going to the general fund. The tax hike would likely be passed on to consumers, raising the price of a gallon of gasoline 2 to 5 cents and adding a few dollars to monthly electricity bills.

Environmentalists supporting the bill, HB 2421, say the barrel tax could help local agriculture and develop clean energy to reduce dependence on fossil fuel. "We need to make a down payment on our clean energy future, and that's what this does. It does so by tapping the source of our problem, which is imported oil, and funding our preferred solution, which is clean energy," said Jeff Mikulina, executive director of the Blue Planet Foundation.

Gov. Linda Lingle has said she would veto the barrel tax because it would increase the cost of living for consumers as the state is emerging from the recession. Lingle vetoed the barrel tax increase last year and the state Senate declined to override the veto because the airline industry said it would be an undue burden on interisland carriers. Lawmakers would exempt aviation fuel from the tax increase this year. Kurt Kawafuchi, the state's tax director, said the barrel tax increase was poorly timed and highly regressive, impacting the poor the most.

The environmental response tax, known as the barrel tax, was created in 1993 and applies to petroleum products sold by distributors to retail dealers and end users other than refiners. The money from the barrel tax was originally intended to help the state Department of Health respond to oil spills and hazardous materials releases.