States look to gas tax holidays to ease pain at pump

States look to gas tax holidays to ease pain at pump

Governors or state legislatures in almost half of the country are looking to suspend their gasoline taxes to give their residents a little relief from soaring prices at the pump.

Elected leaders in at least 21 states have proposed, are considering or have enacted some variation of a gas tax holiday, according to the National Conference of State Legislatures.

The average cost for regular, unleaded fuel rose to $4.33 a gallon on Friday, a record high, according to the AAA auto club. That’s an increase of almost 50 cents from a week ago, 85 cents from a month ago and $1.50 from a year ago. The spike is being caused by inflation, Russia’s war against Ukraine and the resultant U.S. ban on Russian energy imports.

While the relief may be minimal — state gas taxes range anywhere from less than 10 cents per gallon to as high as nearly 60 cents a gallon — the argument from politicians is that something is better than nothing.

And since many states are sitting on large budget surpluses after receiving an influx of federal funding to combat COVID-19, they say they can take the revenue hit from the lost taxes.

Lawmakers in Florida have agreed to suspend its 27 cent-per-gallon gas tax, but not until October. Democratic Gov. Gavin Newsom, whose state of California has the highest gas prices at $5.72 per gallon and a tax of about 53 cents per gallon, has called for a tax rebate. Maryland Gov. Larry Hogan, a Republican, and the state’s Democratic General Assembly leaders have agreed to pause the state gas tax of about 37 cents per gallon for 30 days.

A GOP-proposed gas tax holiday that would last six months is expected to pass the Michigan legislature next week. The state’s gas tax is roughly 27 cents per gallon. However, Gov. Gretchen Whitmer, a Democrat, has signaled she will veto the measure despite calling on Congress to provide a federal gas tax holiday.

The 21 states that have considered or approved relief measures include Arkansas, California, Colorado, Idaho, Illinois, Indiana, Florida, Georgia, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New York, Ohio, Pennsylvania, Rhode Island, Tennessee, Virginia and Washington.

The federal gas tax sits at 18.4 cents per gallon, but many members of Congress have said suspending it is out of the question — at least for now. Some Democrats are interested, but broad support is lacking.

In fact, pausing the federal tax appears to have more bipartisan opposition than support because it would blow a roughly $20 billion hole in the federal Highway Trust Fund, which supports transportation projects. Democratic proponents of a federal gas tax holiday have suggested that the Treasury Department’s general fund could prevent such a budget shortfall, an idea that has failed to persuade their congressional colleagues.

“I think the gas tax holiday is a gimmick that is being proposed by Democrat senators that are up for re-election,” said Sen. Dan Sullivan, a Republican who represents the energy-dependent state of Alaska.

One concern that elected leaders, primarily Democrats, have about gas tax holidays is that the relief may not get passed down to the consumer but rather line the pockets of middlemen, such as gas stations.

Among Democrats, the idea is “certainly being discussed aggressively,” said Sen. Gary Peters, Michigan Democrat and chairman of Senate Democrats’ campaign arm.

“I think it’s a moral — it’s helping working people that are really struggling with their budgets, giving them the feeling that the government understands them and they’re trying to do something,” said. Sen. John Hickenlooper, Colorado Democrat.