As gas tax holidays help consumers in 3 U.S. states, others may follow
The major surge in oil prices has led three states to suspend their gas taxes to help consumers, and that number may soon grow even higher.
State and federal gas taxes are used to maintain roads and highways across the country. On Thursday, Connecticut Governor Ned Lamont signed an emergency legislation that would suspend the state's $0.25-per-gallon tax from April 1 to June 30. Both Maryland and Georgia also temporarily halted their states' gas taxes, providing temporary relief for millions of drivers.
“With this bipartisan action, we are taking steps to provide some relief to consumers as they face rising prices due to a number of international dynamics and market instability that go far beyond our state," Lamont stated.
Inflation and the ongoing war between Russia and Ukraine have driven gas prices to near record highs. The national average price of gas is currently $4.25 per gallon, according to AAA, though states have been affected differently depending on various factors. (For example, gas prices are highest in California, but the state also has additional environmental taxes.)
And while gas prices have fallen slightly from recent highs in the last couple of weeks, they remain elevated compared to the $2.86-per-gallon price as of 12 months ago.
Gas in Maryland is currently $0.44 lower per gallon compared to the national average after its $0.36 gas tax was suspended on March 18 for 30 days, and gas in Georgia is nearly $0.30 lower per gallon than the national average after its gas tax was suspended on March 18 through May.
Other states considering "gas tax holidays" include Ohio, West Virginia, New York, and New Jersey.
California, which has some of the highest gas prices in the country, is eyeing even bigger relief: Governor 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.
"Republicans in California have been pushing ... to suspend the gas tax," California Assemblymember James Gallagher told Yahoo Finance last week. "And many other states have done this. Blue states have done this and it would be a very big help to consumers who are paying the highest costs in the nation right now."
Senate Democrats recently introduced the Gas Tax Relief Act, which would pause the federal fuel tax — which is about $0.18 a gallon for gasoline and $0.24 cents per gallon for diesel — until January 1, 2023. That would save the average American driver about $2.76 for every 15-gallon tank.
According to Kiplinger, if the federal gas tax holiday were to be suspended through the rest of 2022, consumers who drive at least 12,000 miles a year in a car that averages 25 miles per gallon would save about $70.
Some have pushed back at the idea of suspending the gas tax, arguing that it would cause more harm than good in the long term.
“Cutting the gas tax makes gasoline relatively cheaper," Tax Foundation Federal Policy Analyst Alex Muresianu previously told Yahoo Finance. "Therefore, on the margin, people are going to be more likely to choose to drive instead of using some other mode of transportation. That means higher demand for gasoline, which drives price increases."
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter: @daniromerotv
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