How Much Do Gas Tax Holidays Really Save Drivers, Anyway?
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After record highs in June, gas prices are . A half-dozen states tried to ease the pain at the pump by temporarily suspending their regular tax on gasoline. Most of those gas tax “holidays” have already come and gone, but a few are still in effect. (New York’s runs until Dec. 31.)Critics argued that any savings would be eaten up by oil producers and gas stations. But a found that in Maryland, Georgia and Connecticut — which all instituted early gas tax holidays — consumers reaped the benefits.
The researchers prefaced their findings by saying “price reductions were often not sustained during the entire holiday.”
Nearly three-quarters (72%) of Americans support suspending their state fuel tax, according to a Politico/Morning Consult from March.
Which states have put the brakes on gas taxes? Which gas tax holidays are still in effect? And how much are they really saving drivers? Here’s everything you need to know.
Which states suspended their gas tax?
Proposals to limit fuel taxes, which fund interstate highway repair and mass transit projects, have been introduced in more than 20 states. So far only six have pulled the lever. Several of these efforts have come and gone, allowing economists to determine whether they produced real savings for consumers.
Maryland
Maryland mlb jersey became the first state to pause its gas tax, suspending the 36-cent-a-gallon tax on retail gasoline and the 37-cent tax on diesel from March 18 to April 18.
“This is, of course, not a cure-all, and market instability will continue to lead to fluctuations in prices,” said .
found that the March gas tax break had mixed results. Though prices declined 5% while the tax was suspended, after it expired, “gasoline prices in Maryland became higher than what they would have been if the gasoline tax holiday never occurred.”
But the net result , researchers said, with 72% of tax savings being passed onto consumers.
“The suspension of the state gasoline tax in Maryland reduced prices faced by consumers by 26 cents [a gallon] on average over the course of the gasoline tax holiday,” the study said.
On July 1, Maryland’s gas tax, which is tied to inflation, automatically rose 7 cents, to 43 cents per gallon. Comptroller Peter Franchot has called for a special session of the General Assembly to pass another three-month gas tax holiday. If it did, a two-car household fueling up on 15 gallons a week could see a savings of more than $150 over the 90-day pause, Baltimore station FOX 45 .
Georgia
Georgia’s 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. Gov. Brian Kemp, who said lost revenue is being covered by state surplus funds, later extended the gas tax holiday until July 14.
According to the Wharton report, savings in Georgia gradually grew from 7 cents a gallon on March 24 to around 30 cents a gallon on May 16. In all, the researchers found that 58%-65% of tax savings were passed on to consumers
Georgia last suspended its fuel tax in May 2021, when the .
Connecticut
on March 24 temporarily lifting the state’s 25-cent-per-gallon excise tax on gasoline from April 1 to June 30 — a step that he said would save drivers an estimated $90 million.
According to the Penn study, Gasoline prices declined immediately after the pause went into effect. Savings grew from 11 cents on April 2 to 23 cents on April 15, but by May 16 they’d shrunk to about 14 cents.
In all, consumers reaped 71%-87% of the savings from the tax pause, the researchers found. Lamont has since extended the gas tax holiday through November 30, 2022.
New York
In April, lawmakers in Albany approved a budget that suspends the state’s 8-cent fuel tax and an 8-cent sales tax between June 1 and Dec. 31. The move is projected to save New York drivers about 16 cents a gallon.
“By suspending certain fuel taxes for the next seven months, New York is providing some $609 million in direct relief to New Yorkers, a critical lifeline for those who need it most,” Gov. Kathy Hochul .
Florida
In May, Gov. Ron DeSantis signed a budget that includes a that will lower the price of gas by 25.3 cents a gallon.
California
After efforts to suspend the 51-cent gas tax failed, California Gov. Gavin Newsom compromised with lawmakers in June and agreed to suspend a portion of the diesel sales tax, lowering it by about 23 cents per gallon at a cost of $439 million.
What are other states doing about gas taxes?
State — which can include an excise tax, sales taxes, oil inspection fees, county and local taxes and other charges — vary greatly. Pennsylvania has the highest, nearly 59 cents a gallon, and Alaska the lowest, a little over 33 cents a gallon. The weighted national average is about 57 cents a gallon.
In Michigan, a Republican measure to suspend the state’s gas tax failed to garner sufficient support. Gov. Gretchen Whitmer has said she backs the sales tax on gasoline instead. Senate Minority Leader Jim Ananich wants to cut the 6% fee for one year.
Illinois Gov. J.B. Pritzker has at 39.2 cents per gallon through the rest of 2022. In October, Missouri increased its gas tax by 2.5 cents, to 17 cents, then upped it another 2.5 cents on July 1, to 19.5 cents. But the increase is fully refundable for most motorists if they keep their gas receipts and submit them to the Missouri Department of Revenue website. (Drivers can start receipts from October 2021 through June 2022.)
In a more moderate move, a measure introduced in Ohio by about 10 cents a gallon. The bill, Senate Bill 277, has not advanced to a floor vote since it was sent to the Transportation Committee in February.
Some cities are coming up with their own solutions: Since April, Chicago has issued tens of thousands of $150 gas cards and $50 public-transport vouchers to eligible residents via lottery.
How much would suspending the federal gas tax save drivers?
Introduced by Democratic Sens. Maggie Hassan and Mark Kelly, the would pause the federal fuel tax — which is about 18.3 cents a gallon for retail gasoline and 24.3 cents a gallon for diesel — until Jan. 1, 2023.
President Biden has endorsed pausing the tax for three months, but there has been no movement in Congress so far.
A nationwide gas tax holiday would save drivers about $2.75 every time they fill up a typical 15-gallon tank. if you filled up once a week, that adds up to a little more than $44 in savings between September and January.
Does Congress support a federal gas tax holiday?
While Biden has backed the idea, legislation has languished in the Senate since February. Though it was introduced by a Democrat, the party’s leadership has been ambivalent.
“I’ve not been a proponent,” House Majority Leader Steny Hoyer told reporters in June, . “I just don’t know that it gives much relief.
With , the likelihood of a federal gas tax holiday seems even more remote.
What are the arguments against a gas tax holiday?
Critics, including other Democrats in Congress, say even temporarily lifting the tax would hurt the infrastructure projects that it funds.
A gas tax holiday would cost billions, at a time when has seemingly run out of steam.
“While there is undoubtedly a need to provide American consumers relief from spiking costs, there is no guarantee a gas tax suspension would reduce prices at the pump or stem the broader inflation affecting the global economy,” Rep. Earl Blumenauer, a Democrat from Oregon, in mid-June. Blumenauer added the holiday “may only increase oil companies’ bottom lines.”
Some economists also argue a gas tax holiday encourages Americans to drive more rather than address oil supply shortages, and it could also stall the transition to climate-friendly energy sources.
“It’s a way for politicians to pretend they are making the situation better, when in fact they are making it worse,” Maya MacGuineas, president of the nonprofit Committee for a Responsible Federal Budget, wrote in a February op-ed .
MacGuineas predicts oil producers and gas stations would swallow any savings by raising the pretax price of gasoline. Analysis indicates that, over the past decade, less than 20% of state gas tax cuts have been passed down to consumers.
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