The US has found a drastic way to lower gasoline prices, but it could hurt the economy

Three states have suspended taxes on gasoline due to high prices at gas stations. At the same time, more and more officials want to reduce taxes not only at the state level. Read more about the fuel situation told the publication CNet.

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Chicago Mayor Lori Lightfoot is considering abolishing the 8-cent fuel tax in Cook County. In Chicago, a gallon of gasoline costs $4,72 on average, 22 cents more than the Illinois average and 48 cents more than the national average.

After a local gas tax was introduced in 2019, Lightfoot raised it from 2021 cents to 5 cents in 8. Its administration can approve the removal of the 3-cent increase or the complete elimination of the tax.

Nationwide, the average price at gas stations hovered around $4,25 a gallon all week, below record highs earlier in the month, according to the American Automobile Association (AAA). But current value is still 63 cents a gallon more than just a month ago and $1,36 more than at the same time last year.

Three states have suspended fuel taxes, and many of the remaining states are considering similar "holidays" or rebates to offset high fuel prices. Some lawmakers in Congress are also pushing for a suspension of the federal gasoline tax.

Which states have suspended taxes on gasoline

Proposals to limit fuel taxes, which fund projects to repair interstate highways and public transportation, have been submitted in more than 20 states. But so far, only Georgia, Maryland, and Connecticut have actually decided to suspend the tax.

Maryland

The state of Maryland suspended the 18 cents per gallon gasoline tax on March 36,1 for 30 days. Gasoline in the state averaged $29 a gallon on March 3,82, down 35 cents since the holiday went into effect.

The so-called gas vacation is expected to cost the state $100 million.

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“Of course, this is not a panacea, and market volatility will continue to lead to price fluctuations,” said Maryland Gov. Larry Hogan. He, too, supports legislation that would put a stop to automatic fuel tax hikes.

Georgia

Last week, the General Assembly voted unanimously to suspend taxes on fuel until May 31, cutting the price of gasoline by 29,1 cents per gallon and diesel by 32,6 cents per gallon. This 10-week vacation will save drivers more than $300 million, with the lost money covered by the state's reserve funds.

Gasoline prices in the state averaged $29 a gallon on March 3,94, down 28 cents from when Gov. Brian Kemp signed the bill.

Georgia last suspended a fuel tax in May 2021 when the Colonial Pipeline network was shut down. Gasoline prices have risen 56% since then, according to Kemp's office.

Connecticut

Gov. Ned Lamont signed a bill on March 31 to temporarily eliminate the 25-cent-per-gallon fuel tax from April 1 to June 30. This will save drivers about $90 million.

Gasoline prices have skyrocketed, Lamont said, "due to a number of international trends and market volatility that extend far beyond our state." And, in his words, he is "determined to use all available tools to help the residents."

A gallon of gasoline in the state was $29 on March 4,31, down 2 cents from a week ago.

What other states are considering tax holidays

Gasoline taxes, which may include excise tax, sales taxes, county and local taxes, and other charges, vary widely. Pennsylvania is the highest at almost 59 cents per gallon, while Alaska is the lowest at just over 33 cents. The national weighted average is about 57 cents per gallon.

According to a Politico/Morning Consult poll, 72% of Americans support a fuel tax suspension.

In Michigan, the suspension of the tax did not receive enough support. Gov. Gretchen Whitmer said she supports a temporary suspension of the state's gasoline sales tax. Senate Minority Leader Jim Ananich said he would introduce a bill to reduce the 6 percent duty next year.

“The short-term pause is a financially responsible action that we can take to make life easier for drivers now, not next year, and also protect funding for road repairs and save tens of thousands of well-paying jobs,” Whitmer assured.

With an average gas price in Michigan of $4,14, eliminating the sales tax would lower the price by about 25 cents per gallon.

Illinois Gov. Jay Robert Pritzker has proposed freezing the state's 39,2 cents per gallon gas tax, while Florida Gov. Ron DeSantis has pushed for a five-month suspension of the 26,5 cents tax from November, arguing it will save consumers over a billion dollars. .

And when attempts to suspend California's 51-cent gas tax failed, Gov. Gavin Newsom announced a plan to provide a $400 "rebate" for every family with a state-registered car, up to two cars per family. Newsom said the $9 billion plan would be funded by a government budget surplus.

Will the federal gas tax be eliminated?

The Gasoline Tax Exemption Act, introduced last month by Senate Democrats, will suspend the federal fuel tax, which is about 18,3 cents per gallon for gasoline and 24,3 cents per gallon for diesel, until January 1, 2023. The driver gives away about $2,76 each time he fills up.

Six Democratic governors sent a letter to House and Senate leaders urging them to pass a bill that would require the Treasury Department to ensure that savings from oil and gas companies are passed on to consumers.

A Politico/Morning Consult poll found that nearly three-quarters (73%) of Americans want the tax suspended, including a majority of both Democrats (75%) and Republicans (77%).

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But not all legislators support this. Rep. Peter DeFazio, chairman of the House Committee on Transportation and Infrastructure, said he thinks the oil companies will simply pocket any kickback rather than spread the savings to consumers.

The bill, introduced in March, would levy a 50 percent tax on the profits of oil companies earning over $66 a barrel, the average price from 2015 to 2019. Other offers include giving discounts to low income drivers.

Arguments against suspending the gasoline tax

Gasoline taxes are no longer keeping pace with rising infrastructure costs, a problem exacerbated by the growing popularity of electric vehicles.

Some economists warn that a tax holiday on gasoline will only exacerbate the problem, rather than solve oil supply issues.

Gasoline tax holidays, among other things, encourage Americans to travel more and slow down the transition to sustainable energy sources, said economic analyst Maya McGuineas.

“This is a way for politicians to pretend they are making things better when they are actually making things worse,” wrote McGuineas, president of the nonprofit Committee on a Responsible Federal Budget.

She predicts that oil producers and gas stations will swallow up any savings by raising the price of pre-tax gasoline.

However, a complete halt to gasoline taxes, for example, before the end of 2022, would cost $20 billion in lost tax revenue, which means less money for road repairs and other infrastructure projects.

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