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As states consider gas tax holidays, don’t expect big savings


The price of gasoline at Miami’s gas stations on March 10, 2022 is shown in this sign.

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Americans are suffering from rising gasoline prices. Now two states — Maryland and Georgia — are temporarily suspending their gas taxes in order to help their residents save money.

Others could also follow suit and put their own gas tax holidays into place.

Maryland legislatures suspended the state gas tax for 30 daysThis will reduce the cost of gas for drivers by 36.1 cents per gallons, and diesel fuel at 36.85 cents. Gas tax holidays could be costly to the state of almost $100 million.

Georgia will suspend its gas tax. last through May 31. The average state levies 29.1 cents per gallons of gas and 32.6 for diesel.

The average national price for a gallon is now $4.24. That’s up from $2.88 last year. according to AAA.

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Maryland Gov. Larry Hogan said, “We felt the pain at our pump due to the steeply rising prices. Everyone across the country was experiencing it. And we decided we had to do something immediately.” Larry Hogan (a Republican) spoke on Tuesday to CNBC’s “SquawkBox”.

According to reports, more than 12 states have considered similar actions. The federal gas tax is currently 18.4c per gallon. There have been proposals to stop it at Capitol Hill.

Jared Walczak from the Tax Foundation, Vice President for State Projects, stated: “I think we’re going have a bunch states that temporarily suspend gasoline taxes in the coming weeks or months.”

He said that a federal gas tax exemption was “certainly possible”.

There are limited savings

These moves are unprecedented.

Walczak stated that there has not been an exemption from the federal gas tax. Also, the state gas tax holidays have been extremely short-lived.

Average state gas taxes are about 39c per gallon. This is almost double that of the Federal gas tax, which averages 18.4 cents/gallon.

Drivers would be able to save substantial amounts of money if gas taxes were suspended on either the federal or state side.

‘Ill-targeted approach’

Other reasons may make gas tax holidays less efficient.

Walczak explained that although some tax will be paid by consumers, the producers will receive a large portion.

He also said that if the prices fall too quickly, it could cause shortages.

Walczak says that most states are currently in surplus with their budgets. This is partly due to the fact states are able to collect more money from income and sales taxes as individuals have increased their incomes amid federal policy support.

The federal government has, however, been spending deficit through the entire pandemic. Walczak explained that the federal gas tax holiday would place the government “even further in the lurch.”

Both the state and federal governments use gas taxes to fund road infrastructure. He said that cutting off these ties could make it harder to keep them in place.

Walczak reports that gas prices have risen due to the Russia-Ukraine conflict, but they were $1.30 more per gallon for 16 months before inflation.

Drivers would be only helped if there was a reprieve from state or federal gas taxes at a time of record-high prices for all.

Walczak explained that the targeted purchase is made when everyone else feels it. It’s not a targeted approach to wider inflation.