Georgia's gas tax holiday extended: What that means for the state, and for you

Gas prices are up everywhere — but less so in Georgia, after the state legislature suspended the gas tax.

The legislation was signed into law by Gov. Brian Kemp on March 18, and then as it was set to expire on May 31, Kemp extended it through July 14. The measure does not cover federal taxes.

Martin Parker, lecturer at the University of Georgia Department of Management and partner at TechCXO, thinks the gas tax holiday was the right move from the state when considering spiking inflation.

Previous covearge: Kemp signs temporary gasoline tax suspension

"We have to transport all these goods. We have fuel costs in that. We have our own personal fuel costs. I like this one," he said of the policy.

According to the Associated Press, the federal tax is 18.4 cents per gallon and the state tax is 29.1 cents per gallon, without including local or municipal taxes. That state tax also helps local governments, with 10% annually being allocated to cities and counties. According to releases from the Department of Revenue, that tax raised about $150 million monthly in the first three months of this year, even with the tax being removed partway through March.

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Assuming the rate remained steady, the four months of suspending the gas tax could cost the state $600 million in revenue, which could come from the state's surplus $1.25 billion to cover any shortfalls in transportation funding.

The Georgia Chamber of Commerce endorsed the suspension, saying it would help small businesses in particular.

“With nearly half of Georgia’s workforce employed by a small business and with small businesses themselves comprising almost 99% of employers in the state, the suspension of the fuel tax is of critical importance," Chris Clark, president of the Georgia Chamber of Commerce, said in a news release.

A spokesperson for the liberal Georgia Budget & Policy Institute said that their organization has not done any analysis on the suspension of the Georgia tax, but pointed to analysis by the Institute on Taxation and Economic Policy that looked at the impact of a suspension of the 18.4 cent per gallon federal tax.

ITEP estimated that suspending the federal tax would save drivers an average of less than $8 per month, which they conclude would not be worth the lost revenue for infrastructure. The Georgia tax suspension would save drivers an average of about $12.50 per month by this estimate.

Parker thinks both things are true. He estimates savings at about $15-$20 per month for Georgians, but thinks the savings may be higher for small businesses. He pointed to his brother-in-law's Pittsburgh street-sweeping business, where fuel costs are a major expense.

"Gas prices are on billboards, you know, that we drive by so we are very, very sensitive to that, and so, if we see it down by these gas tax holidays, it has some marginal positive impact," Parker said.

Overall, Parker sees the benefit as small. He thinks the absolute best case scenario is that, with fuel costs embedded in so many products, Georgians might save $2 for every $1 of lost revenue. Even so, the lower gas prices are worth the lost revenue, he thinks.

"Gov. Kemp gave back $500 in the tax cut, they gave some substantial pay raises to school teachers … and they did not have any substantial negative impact on Georgia's budget," Parker said. "Just like it's marginal in terms of the individual, I think it's marginal on the state as well."

This article originally appeared on Augusta Chronicle: Georgia's gas tax holiday may have marginal, but real, benefits