Hawai'i drivers could see some relief this year from the highest gas taxes in the nation.

State lawmakers are moving forward on proposals to roll back the excise tax on gasoline that went into effect Jan. 1, boosting prices about 11 cents a gallon.

"There's pressure from the public and there's a large number of legislators that want to do something about it," said State House Majority Leader Kirk Caldwell, D-24th (Manoa).

Hawai'i drivers pay the highest gasoline taxes in the country, but that would change if lawmakers pass one of at least eight bills aimed at easing the burden.

"Anything they can do to lower taxes and run government more efficiently would be great," said Wyman Au, a retired meteorologist in Honolulu. "The price of everything is going up."

The issue is garnering added attention because the taxes on a gallon of regular gasoline in Honolulu rose 11 cents to 61.5 cents on Jan. 1. That drove the final price at most pumps up a similar amount.

Jan. 1 was when a state tax break for ethanol-blended gasoline expired. If lawmakers reinstate that break the total tax at the pump would fall to 50.2 cents a gallon, which includes federal, state and county taxes. That would drop Hawai'i from No. 1 to No. 10 on the list of states with the highest gas taxes, according to a survey by the American Petroleum Institute.

$34M CONSEQUENCE

Eliminating the excise tax on gasoline would cost the state an estimated $34 million in forgone tax revenues annually.

Lowell Kalapa, head of the Tax Foundation of Hawai'i research group, expects lawmakers will eliminate the excise tax on gasoline.

"I think they're going to do the politically correct thing, which is to pass the exemption and take credit for it," Kalapa said.

Measures to lower gasoline taxes are being pushed forward by key lawmakers, which makes passage more likely. However, even if lawmakers decide to eliminate the tax, the change likely would not take effect until summer.

The state's high gasoline prices can be traced to numerous causes including Hawai'i's small market size, geographic isolation and lack of Mainland-type competition.

High taxes also are a major factor. 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. An additional 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.

Also, 4.712 percent in retail and wholesale general excise taxes are applied to gasoline sales. That equates to an added 10.5 cents on a gallon of regular gasoline purchased at today's prices.

Lowering the taxes would help to lower prices in Hawai'i and bring them more in line with Mainland prices.

"A principle difference that you can look at certainly is the difference between taxes here and other places," said Bruce Smith, Tesoro chairman, president and chief executive.

'FAST AND LOOSE'

Unfortunately for consumers, a cut in taxes doesn't automatically translate into lower pump prices. That was the case last April when the general excise tax exemption on gasoline took effect, cutting taxes by 11 cents a gallon.

The tax cut went largely unnoticed because it took effect when oil and gasoline prices were rising. Between April 1 and 7, when the excise tax on gasoline expired, the average price for regular in Honolulu rose nearly 3 cents a gallon, according to the AAA Daily Fuel Gauge Report. However, between Jan. 1 and 7, when the tax was reinstated, the average price at the pump rose 9 cents a gallon.

Prices should have fallen along with taxes back in April, Caldwell said.

"It should have happened," he said. "But none whatsoever was passed on to the consumer. That just tells me that this is another example of the oil industry playing fast and loose and getting as much profit as they can."

The Senate has considered a bill which is intended to force companies to pass any gasoline tax cut to consumers.

Another bill moving forward in the House would give drivers a tax credit equal to the excise tax on gasoline, but they would have to file to get the credit.

THINKING CAP

Some drivers want the state to take more strict measures to contain gasoline prices. Ha'iku resident Paul Levinson said lawmakers should consider reinstituting gasoline price controls. The state capped the wholesale price of gasoline for eight months starting in September 2005, but suspended the caps in part because they caused wild swings in prices.

"As soon as the gas cap was removed the oil companies went back to charging whatever they wanted," Levinson said. "As soon as the cap was lifted when the prices dropped in the rest of the nation, they didn't drop here as much."

Hawai'i's sticky prices sometimes benefit consumers. For example, the average price for regular gasoline nationwide has risen about 10 cents a gallon since late January. Meanwhile, Honolulu prices have fallen about 4 cents a gallon, according to AAA data.

However, those sticky prices also can lead to large gaps between Hawai'i and Mainland prices. For example, in October the difference between Honolulu and Mainland prices rose to 65 cents a gallon, which was up from 22 cents a gallon in early August.

"That demonstrates that even in those times when Hawai'i taxes were lower than the average Mainland tax, the gap between Hawai'i and the Mainland prices grew," said Sen. Ron Menor, D-17th (Mililani, Waipi'o), an architect of price controls.

GAP WIDENS

Since lawmakers suspended price caps in May the average gap between Honolulu and Mainland gasoline prices has been 47 cents a gallon, according to AAA data. That's 8 cents a gallon higher than the gap when price controls were in effect. Menor attributed the increase to "excessive" profits earned by the oil industry in an uncompetitive market.

"I continue to believe consumers would have been better off" with price caps, Menor said. "Without pricing regulation consumers are really being hurt and the oil companies are experiencing a windfall."

Regardless, there's little support among lawmakers to reimplement gasoline price caps, Menor said. And Gov. Linda Lingle, who has the authority to reimpose price caps, does not support gasoline price controls.

Reach Sean Hao at shao@honoluluadvertiser.com.