Opponents of Hawai'i's gasoline price cap law yesterday offered an alternative solution to high gasoline prices — cutting state gasoline taxes.

Honolulu drivers now pay about 65 cents a gallon in county, state and federal taxes, which is more than any other state. The state's high gasoline prices are a result of several factors including Hawai'i's small market size and lack of Mainland-type competition. However, high taxes are a large part of why pump prices are so high.

In addition, gasoline prices in both Hawai'i and the Mainland have spiked sharply in recent weeks due to supply disruptions caused by Hurricane Katrina. Hawai'i's gasoline prices became more closely linked with those on the Mainland following the enactment of a wholesale gasoline price cap Sept. 1.

On O'ahu about 14 cents of that tax bill comes from the state's general excise tax on gasoline sales. Yesterday, Gov. Linda Lingle and other Republicans said gasoline prices could be reduced by eliminating or temporarily suspending the general excise tax on gasoline.

"This is at least something she is at least looking into as far as whether there is anything that can be done to suspend it or cut it," said Lingle spokesman Russell Pang. "It could be ... a way to provide some sort of relief" from high prices.

While federal, state and county fuel taxes are set at a fixed rate per gallon, the amount of general excise taxes that Hawai'i drivers pay varies depending on the price of gasoline. At today's prices, that tax accounts for about 14 cents per gallon of gas. Over the past year the general excise tax on gasoline has averaged about 10 cents a gallon, generating an estimated $36.5 million a year for the state, based on statewide gasoline consumption of about 1 million gallons a day. The state had a $486 million surplus at the end of June — $300 million more than any end-of-fiscal-year balance for the previous three years.

Pang said Lingle was exploring administratively lowering taxes; however, any change may require action by the Democrat-controlled Legislature. At least one lawmaker yesterday said he would entertain talks of cutting the excise tax on gasoline.

"I'm open to their proposals. However, I don't believe that their proposal should be a substitute for the implementation of our gasoline pricing law," said Sen. Ron Menor, D-17th (Mililani, Waipi'o), an architect of the price-cap law. Cutting taxes "does not address fundamental flaws causing high gasoline prices, which is excessive profits earned by oil companies."

As of November 2004, the latest month that comparative numbers are available, Hawai'i gas taxes were the highest in the nation at 57.2 cents a gallon. That was 13.2 cents a gallon more than the nationwide average tax of 44 cents, according to the American Petroleum Institute. Alaska enjoyed the lowest taxes at 26.4 cents a gallon.

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

Senate Republicans yesterday also called for a temporary moratorium on the 16-cent-a-gallon state fuel tax on gasoline. Coupled with an excise tax break, that could save consumers $10.5 million a month based on a retail price of $3 a gallon, said Sen. Fred Hemmings, R-25th (Kailua, Waimanalo, Hawai'i Kai), in a written statement.

Lingle, however, does not support suspending the state fuel tax, which is key to garnering federal highway money. The total amount of fuel tax deposited into the Highway Special Fund in fiscal 2004 was $80.18 million, according to the Department of Budget and Finance. A penny reduction in the fuel tax would decrease revenues by $5 million.

Lowell Kalapa, president of the nonprofit Tax Foundation of Hawai'i, said an elimination of the excise tax on gasoline makes sense. However, a cut in the state fuel tax could jeopardize federal money that comes into Hawai'i.

Reach Sean Hao at shao@honoluluadvertiser.com.