More officials are looking to cut gas taxes. and not just at the state level.
In Chicago, Mayor Lori Lightfoot is considering rolling back Cook County’s 8-cent fuel tax. The City Council Finance Committee is slated to debate amending the fuel tax on Monday. In the Windy City, a gallon of gas averaged $4.72 — 22 cents higher than the Illinois average and 48 cents more than the national average.
After a local gas tax was introduced in 2019, Lightfoot raised it from 5 cents to 8 cents last year. The city administration might endorse rolling back the 3-cent bump or eliminating the tax altogether, Crain’s reported.
Nationwide, the average price at the pump has hovered around $4.25 a gallon all week, according to AAA, down from record highs earlier in the month. But the current cost is still 63 cents a gallon more than just a month ago and $1.36 more than this time last year.
Last week, Connecticut Gov. Ned Lamont signed emergency legislation to pause the state’s 25-cent gas surcharge, and Maryland and Georgia both temporarily killed theirs earlier this month.
At least 20 states are considering gas tax “holidays” ranging from a few months to a few years, and lawmakers in Congress are pushing to pause the federal fuel tax.
Which states have suspended gas taxes? How much does it save consumers? And will we end up paying for it in the long run? Here’s everything you need to know.
Which states have suspended gas taxes?
Proposals to limit fuel taxes, which fund interstate highway repair and mass transit projects, have been introduced in more than 20 states. But so far only Georgia, Maryland and Connecticut have pulled the lever.
On March 18, Maryland paused its 36.1-cents-per-gallon gas tax for 30 days. On Monday, gas averaged $3.82 a gallon in the state, a decline of 35 cents since the pause took effect.
The gas tax holiday, which also applies to the 36.85-cent tax on diesel, is expected to cost the state $100 million.
“This is, of course, not a cure-all, and market instability will continue to lead to fluctuations in prices,” Maryland Governor Larry Hogan said. Hogan is also supporting legislation that would suspend automatic increases in the state fuel tax.
Last week, the General Assembly voted unanimously to pause state fuel taxes until May 31, shaving 29.1 cents a gallon off the price of gasoline and 32.6 cents per gallon off diesel. The 10-week holiday will save drivers over $300 million, according to Kemp, who said lost revenue will be covered by state surplus funds.
On Monday, gas averaged $3.95 per gallon in the Peach State, down 27 cents from when Gov. Brian Kemp signed the bill.
Lamont signed a bipartisan bill on Thursday temporarily lifting the state’s 25-cents-per-gallon motor vehicle tax from April 1 to June 30 — a step that will save drivers an estimated $90 million.
Gas prices have risen sharply “due to a number of international dynamics and market instability that go far beyond our state,” Lamont said in a statement, adding that he’s “determined to use every tool available to provide relief for our residents.”
On Monday, a gallon of gas in the Nutmeg State was $4.31, down 2 cents from a week ago.
Which other states are considering gas tax holidays?
State gas taxes — which can include an excise tax, sales taxes, oil inspection fees, county and local taxes and other charges — vary greatly. Pennsylvania has the highest, at nearly 59 cents a gallon, and Alaska the lowest, at a little over 33 cents. The weighted national average is about 57 cents a gallon.
According to a Politico/Morning Consult poll, 72% of Americans back suspending their state fuel tax.
In Michigan, a Republican measure to suspend the state’s gas tax failed to garner sufficient support. Gov. Gretchen Whitmer has said she backs temporarily suspending the state’s sales tax on gasoline. Senate Minority Leader Jim Ananich has said he will introduce a bill to cut the 6% fee for one year.
“A short-term pause is a fiscally-responsible action we can take that will provide drivers relief at the pump right now — not next year — while also protecting funding for road repairs and saving tens of thousands of good-paying construction jobs,” Whitmer told reporters, the Detroit Free-Press reported.
With gas averaging $4.14 in Michigan, lifting the sales tax would lower the price by about 25 cents a gallon.
Illinois Gov. J.B. Pritzker has proposed freezing the state’s gasoline tax at 39.2 cents per gallon, while Florida Gov. Ron DeSantis has been pushing for a five-month suspension of the state’s 26.5 cent gas tax since November — claiming it would save consumers over a billion dollars.
And after efforts to suspend California’s 51 cent gas tax failed, Gov. Gavin Newsom announced a plan to give a $400 gas-tax “rebate” to every household with a car registered in the state, up to two cars per family. The $9 billion plan would be funded by the state’s budget surplus, Newsom said.
Are the federal gas taxes going to be suspended?
Introduced last month by Senate Democrats, the Gas Tax Relief Act would pause the federal fuel tax — which is about 18.3 cents a gallon for gasoline and 24.3 cents per gallon for diesel — until Jan. 1, 2023. That would save the typical American driver about $2.76 every time they filled up a 15-gallon tank.
Michigan’s Whitmer and five other Democratic governors sent a letter to House and Senate leaders this week urging them to pass the bill, which also requires the Treasury to ensure oil and gas companies pass along savings to consumers.
The Politico/Morning Consult poll found that nearly three-quarters (73%) of Americans want the tax suspended, including majorities of both Democrats (75%) and Republicans (77%).
The case against suspending gas taxes
Gas taxes already fail to keep up with rising infrastructure costs, a problem exacerbated by the rising popularity of electric vehicles.
Some economists warn a gas tax holiday would just make the problem worse — and not address issues involving the oil supply.
Gas tax holidays also encourage Americans to drive more and stall the transition to climate-friendly energy sources, economic analyst Maya MacGuineas, wrote in an op-ed in The Hill.
“It’s a way for politicians to pretend they are making the situation better, when in fact they are making it worse,” wrote MacGuineas, president of the nonprofit Committee for a Responsible Federal Budget.
She predicts oil producers and gas stations would swallow any savings by raising the pretax price of gasoline.
There’s also a question of how much a gas tax holiday really saves drivers: If the federal gas tax was suspended for the rest of 2022, according to Kiplinger, a motorist who drives 12,000 miles a year in a car that averages 25 miles per gallon would save about $70.
It would cost a reported $20 billion in lost tax revenue, though, meaning less money for road repairs and other infrastructure projects at a time when has seemingly run out of gas.