These States Have Launched Gas Tax ‘Holidays’ to Combat High Fuel Prices

Gas prices have paused their rapid ascent, plateauing at a national average of about $4.19 a gallon on Monday, according to AAA.  That’s down from record highs in mid-March. But the current price at the pump is still $1.32 more than it was this time last year.

In response, three states have suspended fuel taxes and more than a dozen others are debating a similar move. In California, Gov. Gavin Newsom is considering $400 rebates for households with a registered car, while Chicago Mayor Lori Lightfoot has proposed gas cards to help low-income residents get through the crisis. 

Democrats in the Senate, meanwhile, have sponsored a bill to suspend the federal gas tax through the end of 2022.

Which states are putting the brakes on gas taxes? How much will 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. So far only Georgia, Maryland and Connecticut have pulled the lever. 

Maryland
On March 18, Maryland paused its 36.1-cents-per-gallon gas tax for 30 days. On Monday, gas averaged $3.79 a gallon in the state, a decline of 38 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.

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. The 10-week holiday will save drivers over $300 million, according to Gov. Brian Kemp, who said lost revenue will be covered by state surplus funds.

On Sunday, gas averaged $3.86 per gallon in the Peach State, down 36 cents from when Kemp signed the bill. 

Georgia last suspended its fuel tax in May 2021, when the Colonial Pipeline network shut down. Since then, the cost of gasoline has risen 56%, according to Kemp’s office.

Connecticut
Connecticut Gov. Ned Lamont signed a bipartisan bill on March 24 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 $4.03, down about 32 cents from before the tax was suspended.

What are other states doing about gas prices?

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 sales tax on gasoline instead. Senate Minority Leader Jim Ananich plans to introduce a bill to cut the 6% fee for one year.

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. Chicago Mayor Lori Lightfoot also announced she plans to distribute $150 gas cards and $50 public-transport vouchers to needy residents via lottery starting April 27.  

Missouri’s state legislature has introduced a bill that suspends state gas taxes of 19.5 cents a gallon for six months. In more moderate measures, the Ohio legislature is debating a bill to reduce its state gas taxes by about 10 cents a gallon.

Efforts in California to suspend the 51-cent gas tax failed, but Gov. Gavin Newsom has 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.

Will the federal gas tax 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.

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%).

A bill introduced in March would levy a 50% tax on profits oil companies earn above $66 per barrel, the average price from 2015 through 2019. Other proposals include offering rebates to low-income drivers and requiring oil companies to use existing drilling permits or risk losing them.

Last week, President Joe Biden announced the release of 1 million barrels of oil a day from the US’ Strategic Petroleum Reserve. 

What’s the argument 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 that 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 President Biden’s Build Back Better plan has seemingly run out of gas.