Way to ease pain at the pump
Some states suspend their gas taxes, a temporary move that one expert calls ‘gimmicky’
Seeking to soften the blow of higher gas prices on consumers, some states have suspended their gas taxes, and several other states may soon follow.
Gas prices, which had already been climbing during the pandemic, rose to new highs in recent weeks in part because the war in Ukraine led to more volatility in the energy market. The average cost of gas in the United States hit a record high March 11 at $4.33 per gallon, according to AAA.
Although that number has since declined to an average of $4.24 per gallon, it is still 18% higher than it was last month and 48% more than it was a year ago.
Industry analyst Trilby Lundberg of the Lundberg Survey said Sunday that the price at the pump is $1.42 higher than it was a year ago.
Some states are using budget surpluses from federal pandemic aid and increased tax revenue to cover the cost of suspending gas taxes for the next several weeks or months. Others are also considering pausing fares for public transportation.
On March 18, Gov. Larry Hogan of Maryland announced the state would suspend its tax of 36.1 cents per gallon for gas, and its slightly higher tax for diesel fuel, for the next 30 days, a measure that will cost the state $100 million.
“As we continue to stand in solidarity against Russian aggression in Ukraine, and as Marylanders face the impact of surging inflation, with the average price of gas rapidly rising, this bipartisan action will provide some relief for the pain at the pump,” Hogan said as he signed the bill into law.
That same day, Gov. Brian Kemp of Georgia signed a bill suspending the state’s gas tax until May 31.
On March 24, Gov. Ned Lamont of Connecticut announced his state would temporarily suspended the 25 cents per gallon excise tax — as well as fares needed to ride a public bus — from April 1 to June 30.
Officials in other states are considering similar measures.
In Ohio, where gas prices have risen 21% over the past month, Republican lawmakers are considering a gas tax cut that would cost up to $4 billion over the next five years.
In West Virginia, a group of Democratic lawmakers is calling on the governor to suspend gas prices for the next month.
And in California, Gov. Gavin Newsom proposed an $11 billion relief package that would pause the state’s gas tax and provide free public transportation to residents.
But while many officials have embraced this kind of legislation, some experts say that a temporary reprieve from state gas taxes is an ill-conceived fix that will only hurt Americans in the long run.
The relief could provide a respite for drivers, and help lower shipping costs for foods, but the moves do not address other people or problems affected by inflation, they argue.
“This is primarily concentrated on drivers, and therefore doesn’t provide broader relief from all of the inflation-induced price increase,” said Jared Walczak, vice president of state projects at the Center for State Tax Policy, part of the nonprofit Tax Foundation.
Drivers could experience sticker shock once these temporary cuts end and prices revert to normal, he said.
“Even though it will provide some relief at the pump, it’s ultimately a fairly gimmicky way of providing relief at a time when consumers are facing higher prices across the board,” Walczak said.