Maryland and Georgia have suspended the state gas tax, and others are expected to follow suit.
Carl D. Walsh/Portland Portland Press Herald /Getty Images
Gas prices are trending slightly downward, with a gallon of regular costing about an eighth of a cent less Monday than it did a week ago. But state lawmakers aren’t taking any chances: Maryland and Georgia both temporarily suspended state gas taxes on Friday to give motorists a reprieve at the pump.
Many other states are considering similar gas tax “holidays,” and there’s a bill in Congress to pause the federal fuel tax.
How much could putting the brakes on gas taxes save consumers? And will we end up paying for it in the long run? Here’s everything you need to know.
How much are the federal and state gas taxes?
The federal fuel tax is about 18.3 cents a gallon for gasoline and 24.3 cents per gallon for diesel. There is also a 0.1 cent Leaking Underground Storage Tank fee on each gallon.
State gas taxes — which can include an excise tax, sales taxes, oil inspection fees, county and local taxes, underground storage tank fees 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 for state gas tax is about 57 cents a gallon.
How much will suspending gas taxes save?
On Friday, Maryland lawmakers unanimously passed a bill that suspends gas taxes for 30 days, saving drivers about 36.1 cents a gallon on gasoline and 36.8 cents on diesel.
On a 15-gallon tank, that works out to about $5.42 every time they fill ‘er up.
Maryland Governor Larry Hogan said the gas tax pause, which will cost the state nearly $100 million in lost revenue, is possible thanks to the state’s record surplus. He is also supporting legislation that would suspend automatic increases in the gas tax.
“This is, of course, not a cure-all, and market instability will continue to lead to fluctuations in prices,” Hogan, a Republican added. “But we will continue to use every tool at our disposal to provide relief for Marylanders.”
On Monday, gas averaged $3.11 a gallon in the state.
Pausing the gas tax saves Marylanders about $5.42 every time they fill up the tank.
Al Seib
In Georgia, Gov. Brian Kemp also signed a bill passed unanimously by the General Assembly that pauses state fuel taxes until May 31, shaving 29.1 cents a gallon off the price of gas.
Motorists with a 15-gallon gas tank should save about $4.37 every time they fill up the tank.
In May 2021, Georgia paused the state’s gas tax for nearly a week when the Colonial Pipeline network shut down. Since then, the cost of gasoline has risen 56%, according to a statement from Kemp’s office.
The two-and-a-half-month gas tax holiday will save Georgians over $300 million altogether, according to Kemp, who, like Hogan, indicated the lost revenue will be recouped by state surplus funds.
On Monday, gas prices in Georgia were averaging $4.11 per gallon.
These savings won’t be immediately apparent, however: Any gas already supplied to stations has already been taxed by distributors, and fuel ordered before the pause kicked in will also have been taxed.
When the lower prices will be reflected at the tanks depends on when your local gas station last ordered fuel and how much it still has in the ground.
Are other states looking at pausing gas taxes?
Plans for gas tax “holidays” are in various stages of development in at least 22 states, according to The New York Times.
Lawmakers in California are considering a $400 gas rebate to residents to off-set the high cost at the pump.
Robert Gauthier
Michigan Gov. Gretchen Whitmer has called for suspending the 6% sales tax on gas in her state, while Republicans in the state House and Senate are pushing legislation to pause the state’s 27 cent gas tax.
Illinois Gov. J.B. Pritzker has proposed freezing the state’s gasoline tax at 39.2 cents per gallon, along with other tax cuts intended to help out cash-strapped residents.
Florida Gov. Ron DeSantis has been pushing for a suspension of the state’s 26.5 cent gas tax since November — claiming a five-month pause would save consumers over a billion dollars. Republican lawmakers “are considering some elements of the Governor’s proposal on gas tax,” Rep. Bobby Payne said, but are hesitant to buy into the whole package.
And after efforts to suspend California’s 51 cent gas tax failed, state legislators announced a plan Thursday to give every resident a $400 gas-tax “rebate.” The $9 billion proposal would be funded by the state’s current budget surplus.
Will federal gas taxes be suspended?
A bill in Congress would pause the 18.4 cent federal gas tax until Jan. 1, 2023.
The measure, introduced by Rep. Josh Harder of California, would require the Secretary of the Treasury to monitor the program to ensure oil and gas companies pass along the savings to consumers.
If passed, the act would save the average driver about $2.76 every time they filled up a 15-gallon tank. If the federal gas tax was suspended for the rest of 2022, according to Kiplinger, someone who drives 12,000 miles a year in a car averaging 25 miles per gallon would save about $70.
What are gas taxes spent on?
Federal gas taxes fund interstate highway repair and mass transit projects through the Highway Trust Fund, established in the 1950s. They also go toward the Leaking Underground Storage Tank Trust Fund, which helps clean up oil leaks, which can contaminate groundwater and cause other environmental and health issues.
Suspending the gas tax for the remainder of 2022 would shortchange the Highway Trust Fund by about $20 billion, according to the Committee for a Responsible Federal Budget, or half its annual budget.
State gas taxes also largely fund transportation projects. In Oklahoma, for example, nearly two-thirds of the tax is allotted to the state’s Department of Transportation, with a third going to localities for road and bridge maintenance and other projects.
The case against suspending gas taxes
Already the funds collected from gas taxes fail to keep up with rising infrastructure costs, a problem exacerbated by the rising popularity of electric vehicles.
Some economists warn a gas tax “holiday” wouldn’t impact the oil supply and would only encourage consumers to drive more. The pause would also 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 CRFB.
She predicts oil producers and gas stations would reap the real benefits by raising the pretax price of gasoline. And the inflationary hangover when the holiday expired would be worse than when it began.
In a Times op-ed, economics writer Peter Coy said gas tax holidays hurt lower-middle-class Americans the most.
“Working people who need to drive a lot and can’t afford an electric vehicle pay a bigger share of their incomes on gas taxes and fees than the rich, especially if the rich own Teslas.”
The poorest Americans, Coy said, aren’t as impacted by the price of gas because they tend not to have cars.